3)
Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

4)
Proposed maximum aggregate value of transaction:

5) Total fee paid:

☐

Fee paid previously with
preliminary materials:

☐

Check box if any part of the fee is
offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule and the
date of its filing.

You are cordially invited to attend the
2017 Annual Meeting of Stockholders of Franklin Resources, Inc. The meeting will
be held on Wednesday, February 15, 2017 at 9:30 a.m. local time, at our offices
in San Mateo, California. We hope that you will be able to attend.

During the past fiscal year, our Company
has faced periods of market volatility and increasing regulation, significant
challenges for both management and the Board of Directors. The Board has
remained focused on the oversight of the Companys strategy, devoting
substantial time to our strategic priorities over the short and long term. The
Board believes that although short term performance is important, it should be
assessed in the context of the Companys long term goals.

We believe our management team has shown
strong commitment and been proactive in the face of these pressures, developing
new products, preparing for upcoming regulatory changes and showing financial
discipline and expense management.

The Board has also taken an active role in
stockholder engagement this year, initiating a formal stockholder outreach
program under which we invited unaffiliated stockholders representing 25% of the
Companys outstanding shares to meet and discuss governance and executive
compensation best practices as well as other issues of interest to them. The
Board considers this information when developing our policies and practices. We
plan to continue our stockholder outreach program on an annual basis going
forward.

Six new directors have joined our Board in
the past five years, bringing with them diversity and fresh perspectives and
experiences. Our directors represent diverse viewpoints, with a wide array of
experiences, professions, skills and backgrounds. The Board is committed to a
rigorous and comprehensive self-evaluation practice. As part of this effort, our
directors review the Board and Board Committeeperformance, as well as individual
director performance.

In addition, we continued to maintain our
focus on key governance practices that we believe are important to our
stockholders. These practices include: robust succession planning; 70%
independent directors; no over-boarding; stock ownership guidelines for
directors and officers; annual majority voting for directors; no poison pill;
and no super-majority voting requirements.

We are committed to maintaining a culture
that promotes and values performance, integrity, ethics and a long-term view
aligned with the interests of our stockholders. Management compensation is
performance driven. In addressing compensation decisions for fiscal year 2016,
the Compensation Committee weighed our Company performance and the individual
performance of our management. As a result, incentive compensation was modified
to reflect corporate results. Please read the Compensation Discussion and
Analysis section of the Proxy Statement for specific information.

We would like to thank each of you for
your support of our Board and our Company. We hope that you find the Proxy
Statement informative and look forward to
continuing our dialogue with you in the year to come. We look forward to seeing
you at the meeting.

The Board of Directors of Franklin
Resources, Inc. (the Company) invites you to attend the 2017 annual meeting of
stockholders (the Annual Meeting) to be held on Wednesday, February 15, 2017
at 9:30 a.m., Pacific Time, in the H. L. Jamieson Auditorium, at One Franklin
Parkway, Building 920, San Mateo, California for the following
purposes:

1.

To elect the 10 nominees for
director named herein to the Board of Directors to hold office until the
next annual meeting of stockholders or until that persons successor is
elected and qualified or until his or her earlier death, resignation,
retirement, disqualification or removal.

2.

To hold an advisory vote to
approve the compensation of the Companys named executive
officers.

3.

To hold an advisory vote on how
frequently stockholders believe we should obtain future advisory votes on
the compensation of the Companys named executive officers.

4.

To ratify the appointment of
PricewaterhouseCoopers LLP as the Companys independent registered public
accounting firm for the fiscal year ending September 30,
2017.

5.

To consider and vote on a
stockholder proposal requesting a Board of Directors report on climate
change and proxy voting practices, if properly presented at the Annual
Meeting.

6.

To consider and vote on a
stockholder proposal requesting a Board of Directors report on executive
pay and proxy voting practices, if properly presented at the Annual
Meeting.

7.

To transact such other business
that may properly be raised at the Annual Meeting or any adjournments or
postponements of the Annual Meeting.

We are primarily furnishing proxy
materials to our stockholders on the Internet rather than mailing paper copies
of the materials to each stockholder. As a result, some of you will receive a
Notice of Internet Availability of Proxy Materials and others will receive paper
copies of the Proxy Statement and our Annual Report. The Notice of Internet
Availability of Proxy Materials contains instructions on how to access the Proxy
Statement and the Annual Report over the Internet, instructions on how to vote
your shares, as well as instructions on how to request a paper copy of our proxy
materials, if you so desire. Electronic delivery is designed to expedite the
receipt of materials, significantly lower costs and help to conserve natural
resources.

Whether you received the Notice of
Internet Availability of Proxy Materials or paper copies of our proxy materials,
the Proxy Statement, the proxy card, the Annual Report, and any amendments to
the foregoing materials that are required to be furnished to stockholders are
available for you to review online at www.proxyvote.com.

The Companys Board of Directors has fixed
the close of business on December 19, 2016, as the record date for the
determination of stockholders entitled to receive notice of, and to vote on, all
matters presented at the Annual Meeting or any adjournments thereof. Your vote
is very important. Even if you think that you will attend the Annual Meeting, we
ask you to please cast your vote. You may vote your shares via the Internet, by
telephone, by mail or in person at the Annual Meeting.

Attendance at the Annual Meeting will
be limited to stockholders as of the record date. Each stockholder will need to
provide an admission ticket or proof of ownership of the Companys stock and
valid picture identification for admission to the meeting. Admission procedures
are described further on page 3 of the Proxy Statement.

By order of the Board of
Directors,

MARIA GRAYVice President and Secretary

January 4, 2017San Mateo,
California

Your vote is
important.Please vote via the
Internet, by telephone, by mail or in person at the Annual
Meeting.

This Proxy Statement and the accompanying
Notice of Annual Meeting of Stockholders are furnished in connection with the
solicitation by the Board of Directors of Franklin Resources, Inc., a Delaware
corporation (the Company), of the accompanying proxy to be voted at the 2017
annual meeting of stockholders (the Annual Meeting), which will be held on
Wednesday, February 15, 2017, at 9:30 a.m., Pacific Time, in the H. L. Jamieson
Auditorium, One Franklin Parkway, Building 920, San Mateo, California,
94403-1906, at the Companys principal executive offices. We expect that this
Proxy Statement and the enclosed proxy will be mailed and/or made available to
each stockholder entitled to vote on or about January 4, 2017. References to
us, we or our as used throughout this Proxy Statement mean the Company.

All materials filed by the Company with
the Securities and Exchange Commission (the SEC) can be obtained at the SECs
Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 or through
the SECs website at www.sec.gov. You may obtain
information on the operation of the Public Reference Room by calling
1-800-SEC-0330.

IMPORTANT NOTICE REGARDING THE
AVAILABILITY OF PROXY MATERIALS

Under the rules adopted by the SEC, we are
furnishing proxy materials to our stockholders primarily over the Internet. We
believe that this process should expedite stockholders receipt of proxy
materials, lower the costs of our Annual Meeting and help to conserve natural
resources. On or about January 4, 2017, we mailed to each of our stockholders
(other than those who previously requested electronic or paper delivery,
participants in the Franklin Templeton 401(k) Retirement Plan (the 401(k)
Plan) and holders of shares in excess of certain thresholds), a Notice of
Internet Availability of Proxy Materials containing instructions on how to
access and review the proxy materials, including this Proxy Statement and our
Annual Report, on the Internet and how to access a proxy card to vote on the
Internet or by telephone. The Notice of Internet Availability of Proxy Materials
also contains instructions on how to receive a paper copy of the proxy
materials. If you received a Notice of Internet Availability of Proxy Materials
by mail, you will not receive a printed copy of the proxy materials unless you
request one. If you received paper copies of our proxy materials, you may also
view these materials at www.proxyvote.com. If you received
paper copies of our proxy materials and wish to receive them by electronic
delivery in the future please request electronic delivery on www.proxyvote.com or
https://enroll.icsdelivery.com/ben/Default.aspx.

Holders of the Companys common stock, par
value $0.10 per share (the common stock), at the close of business on December
19, 2016 (the Record Date) are entitled to one vote for each share owned on
that date on each matter presented at the Annual Meeting. As of December 19,
2016, the Company had 566,559,183 shares of common stock outstanding. If your
shares are held in a stock brokerage account or by a bank or other holder of
record, you are considered the beneficial owner of shares held in street name.
The Notice of Internet Availability of this Proxy Statement has been forwarded
to you by your broker, bank or other holder of record who is considered, with
respect to those shares, the stockholder of record. As the beneficial owner, you
have the right to direct your broker, bank or other holder of record on how to
vote your shares by using the voting instruction form included in the mailing or
by following their instructions for voting by telephone or on the
Internet.

WHAT MATTERS ARE TO
BE CONSIDERED AT THE ANNUAL MEETING?

At the Annual Meeting, stockholders will
be asked to consider and vote upon the following:

Proposal No. 1: Election of
Directors. The proposal provides for the
election of 10 directors to the Companys Board to hold office until the next
annual meeting of stockholders or until that persons successor is elected and
qualified or until his or her earlier death, resignation, retirement,
disqualification or removal.

Proposal No. 2: Advisory Vote to
Approve Executive Compensation. This proposal
calls for a non-binding, advisory vote regarding the compensation paid to our
named executive officers (the Say-on-Pay Vote). Accordingly, there is no
required vote that would constitute approval. However, our Board of Directors,
including our Compensation Committee, values the opinions of our stockholders
and will consider the result of the vote when making future decisions regarding
our executive compensation policies and practices.

Proposal No. 3: Advisory Vote to
Approve the Frequency of Advisory Votes on Executive
Compensation. This proposal provides a choice
among three frequency periods (every one, two or three years) for future
advisory Say-on-Pay Votes. The frequency period that receives the most votes
will be deemed to be the recommendation of our stockholders. However, because
this vote is advisory and not binding on our
Board of Directors, we may decide that it is in the best interests of our
stockholders to hold a Say-on-Pay Vote more or less frequently than the
frequency period selected by our stockholders.

Proposal No. 4: Ratification of
Appointment of Auditors. The proposal
provides for the ratification of the appointment of PricewaterhouseCoopers LLP
as the Companys independent registered public accounting firm for the fiscal
year ending September 30, 2017 (fiscal year 2017).

The Board of Directors does not know of
any other matter to be brought before the Annual Meeting. If any other matters
properly come before the meeting, the persons named in the form of proxy or
their substitutes will vote in accordance with their best judgment on such
matters.

HOW MANY VOTES ARE
NEEDED TO HOLD THE ANNUAL MEETING?

In order to take any action at the Annual
Meeting, a majority of the Companys outstanding shares as of the Record Date
must be present in person or by proxy and entitled to vote at the Annual
Meeting. This is called a quorum.

WHO COUNTS THE
VOTES?

The voting results will be tallied by
Broadridge Financial Solutions, Inc. and the Inspector of Elections, and
reported on a Current Report on Form 8-K filed with the SEC within four business
days following the meeting.

WHAT IS A
PROXY?

A proxy allows someone else (the proxy
holder) to vote your shares on your behalf. The Board of Directors is asking
you to allow any of the persons named on the proxy card (Gregory E. Johnson,
Chairman of the Board and Chief Executive Officer; Rupert H. Johnson, Jr., Vice
Chairman; and Maria Gray, Vice President and Secretary) to vote your shares at
the Annual Meeting.

Whether you hold shares directly as a
stockholder of record or beneficially in street name, you may vote your shares
without attending the Annual Meeting. You may vote by granting a proxy or, for
shares held in street name, by submitting voting instructions to your bank,
broker or other holder of record. You may also vote by telephone, using the
Internet or by mail as outlined in the Notice of Internet Availability of Proxy
Materials or on your proxy card. Please see the Notice of Internet Availability
of Proxy Materials, your proxy card or the information your bank, broker, or
other holder of record provided to you for more information on these options.
Except for certain stockholders described below, the deadline for voting by
telephone or by using the Internet is 11:59 p.m., Eastern Time (ET), on
Tuesday, February 14, 2017.

The persons named as your proxy holders on
the proxy card will vote the shares represented by your proxy in accordance with
the specifications you make. For stockholders of record that return their proxy
card but do not provide instructions on how to vote, the persons named as your
proxy holders on the proxy card will vote the shares represented by the proxy
FOR all nominees to the Board of Directors (Proposal No. 1); FOR the Say-on-Pay
Vote (Proposal No. 2); to hold future Say-on-Pay Votes EVERY THREE YEARS
(Proposal No. 3); FOR the ratification of the appointment of
PricewaterhouseCoopers LLP as the Companys independent registered public
accounting firm (the independent auditors) for fiscal year 2017 (Proposal No.
4); AGAINST the stockholder proposal requesting a Board report on climate change
and proxy voting practices (Proposal No. 5); and AGAINST the stockholder
proposal requesting a Board report on executive pay and proxy voting practices
(Proposal No. 6). For beneficial holders that return their voting instructions
but do not provide instructions on how to vote, your bank, broker or other
holder of record will only have the discretion to vote on the ratification of
the appointment of PricewaterhouseCoopers LLP as the Companys independent
auditors for fiscal year 2017 (Proposal No. 2). Additionally, unless you specify
otherwise on your proxy card, if any other matters come before the Annual
Meeting to be voted on, the persons named as your proxy holders on the proxy
card will vote, act and consent on those matters in their discretion.

For participants in the Franklin Templeton
401(k) Retirement Plan, your shares will be voted as you specify on your proxy
card. If you do not vote, your shares will be voted by the independent fiduciary
for and against the proposals in the same proportion as shares for which
directions are received by the independent fiduciary, unless the independent
fiduciary decides that the law requires that the independent fiduciary vote them
differently. (This also means that the way you
vote will also affect how the independent fiduciary will vote the shares of
participants who do not vote.) If you wish to abstain from voting on any matter,
you must indicate this on your proxy card. You cannot vote your 401(k) Plan
shares in person at the Annual Meeting. To allow sufficient time for your shares
to be voted as you instruct, the trustee must receive your vote by no later than
2:00 p.m. ET on February 10, 2017.

CAN I CHANGE OR
REVOKE MY VOTE AFTER I RETURN MY PROXY CARD?

Yes. Whether your vote is submitted via
the mail, the Internet or by telephone, you may change or revoke your proxy at
any time before it is voted. A proxy, including an Internet or telephone vote,
may be changed or revoked by submitting another proxy with a later date at any
time prior to the beginning of the Annual Meeting. You may also revoke your
proxy by attending the Annual Meeting and voting in person. Participants in the
401(k) Plan may revoke their proxy by no later than 2:00 p.m. ET on Friday,
February 10, 2017.

CAN I VOTE IN
PERSON AT THE ANNUAL MEETING INSTEAD OF VOTING BY PROXY?

Yes. Please see requirements for attending
the Annual Meeting under Who may attend the Annual Meeting? However, we
encourage you to complete and return the enclosed proxy card to ensure that your
shares are represented and voted. Beneficial owners must obtain a legal proxy
from your bank, broker or other holder of record that holds your shares in order
to vote your shares at the Annual Meeting. Participants in the 401(k) Plan must
vote by no later than 2:00 p.m. ET on Friday, February 10, 2017 and may not vote
at the Annual Meeting.

WHO MAY ATTEND THE
ANNUAL MEETING?

Attendance at the Annual Meeting is
limited to stockholders as of the Record Date. You will need to provide proof of
ownership to enter the Annual Meeting. If your shares are held beneficially in
the name of a bank, broker or other holder of record you must present proof,
such as a bank or brokerage account statement, of your ownership of common stock
as of December 19, 2016, to be admitted to the Annual Meeting. For holders of
record, please bring either the admission ticket attached to your proxy card or
your Notice of Internet Availability of Proxy Materials. At the Annual Meeting,
representatives of the Company will confirm your stockholder status.
Stockholders must also present a form of photo identification such as a drivers
license or passport to be admitted to the Annual Meeting. No cameras, recording
equipment, electronic devices, bags, briefcases, packages or similar items will
be permitted at the Annual Meeting.

To be counted as represented, a proxy
card must have been returned for those shares, the stockholder must have voted
the shares by telephone or over the Internet, or the stockholder must be present
and vote at the Annual Meeting. Affirmative and negative votes, abstentions and
broker non-votes will be separately tabulated.

WHAT IS A BROKER
NON-VOTE?

A broker non-vote occurs when a bank,
broker or other holder of record holding shares for a beneficial owner does not
vote on a particular proposal because the nominee does not have authority to
vote on that particular proposal without receiving voting instructions from the
beneficial owner. Under New York Stock Exchange (NYSE) rules, the ratification
of the selection of an independent registered public accounting firm (Proposal
No. 4), is considered a routine matter, and brokers generally may vote on
behalf of beneficial owners who have not furnished voting instructions, subject
to the rules of the NYSE concerning transmission of proxy materials to
beneficial owners, and subject to any proxy voting policies and procedures of
those brokerage firms. Brokers may not vote on the other proposals contained in
this Proxy Statement, which are considered non-routine proposals, unless they
have received voting instructions from the beneficial owner, and to the extent
that they have not received voting instructions, brokers report such number of
shares as non-votes.

WHAT IS THE VOTING
REQUIREMENT TO APPROVE EACH OF THE PROPOSALS?

●

The election of directors (Proposal
No. 1) requires that a director receive a majority of the votes cast with
respect to that director at the Annual Meeting. This means that the number
of shares of stock voted FOR a director must exceed the number of votes
cast AGAINST that director. Abstentions and broker non-votes will not
have any effect on the election of directors.

●

The approval of the compensation of
the Companys executive officers (Proposal No. 2) requires a majority of
the votes cast with respect to this matter. This means that the number of
shares of stock voted FOR approval of the compensation of the Companys
executive officers must exceed the number of votes cast AGAINST the
proposal. The vote on Proposal No. 2 is advisory and therefore not binding
on the Company. Abstentions and broker non-votes will not have any effect
on the approval of this proposal.

●

The approval of a frequency
selection with regard to how often shareholders should be offered an
advisory vote on the compensation of the
Companys executive officers (Proposal No. 3) will be determined by which
option, ONE YEAR, TWO YEARS, or THREE YEARS receives a plurality of
the votes cast with respect to this matter. The vote on Proposal No. 3 is
advisory and therefore not binding on the Company. Abstentions and broker
non-votes will not have any effect on the approval of this
proposal.

●

The affirmative vote of the holders
of shares of common stock, having a majority of the votes present in
person or represented by proxy at the Annual Meeting and entitled to vote
on the matter, are necessary to ratify the appointment of
PricewaterhouseCoopers LLP (Proposal No. 4). Abstentions will have the
same effect as a vote against this proposal.

●

The affirmative vote of the holders
of shares of common stock, having a majority of the votes present in
person or represented by proxy at the Annual Meeting and entitled to vote
on the matter, are necessary to approve the stockholder proposal (Proposal
No. 5) requesting a Board report on climate change and proxy voting
practices. Abstentions will have the same effect as a vote against this
proposal.

●

The affirmative vote of the holders
of shares of common stock, having a majority of the votes present in
person or represented by proxy at the Annual Meeting and entitled to vote
on the matter, are necessary to approve the stockholder proposal (Proposal
No. 6) requesting a Board report on executive pay and proxy voting
practices. Abstentions will have the same effect as a vote against this
proposal.

Shares that are voted in person or by
proxy are treated as being present at the Annual Meeting for purposes of
establishing a quorum, and will be included in determining the number of shares
represented and voted at the Annual Meeting with respect to such matter. Broker
non-votes will be counted for purposes of determining the presence or absence of
a quorum for the transaction of business. If the persons present or represented
by proxy at the Annual Meeting constitute the holders of less than a majority of
the outstanding shares of common stock as of the record date, the Annual Meeting
may be adjourned to a subsequent date for the purpose of obtaining a
quorum.

WHO PAYS FOR THIS
PROXY SOLICITATION?

Your proxy is being solicited by the Board
on behalf of the Company. The Company pays the cost of soliciting your proxy and
reimburses brokerage costs and other fees for forwarding proxy materials to
you.

RECOMMENDATION OF THE
BOARD The Board recommends a vote FOR the election to the Board
of each of the nominees listed below. The voting requirements for this
proposal are described in the Voting Information section
above.

NomineesListed below are the names, ages as of
December 31, 2016, and principal occupations and membership on public boards for
the past five years of each nominee. In addition, we have also provided
information concerning the particular experience, qualification, attributes
and/or skills that the Corporate Governance Committee and the Board considered
as relevant to each nominee that led to the conclusion that he or she should
serve as a director.

Career Highlights:Retired California Chairman of JPMorgan
Chase & Co., a global financial services firm, serving from 2009 to
January 2013. From 1971 until his retirement in 2003 affiliated with
Goldman Sachs & Co., serving as a general partner from 1982 to 1998.
Director, Avery Dennison Corporation and Fluor
Corporation.

Key Attributes,
Experience and Skills:Mr. Barkers
significant financial expertise provides the Board with valuable perspectives on
international financial and investment management matters. During his 40 plus
years of experience with Goldman, Sachs & Co., and JP Morgan Chase &
Co., during which he has served in numerous leadership roles, including as head
of Goldman Sachs investment banking activities on the West Coast, he developed
a deep understanding of capital structure, strategic planning, mergers and
acquisitions and wide-ranging management expertise. Mr. Barkers current and
prior service on the boards of several private and public companies as well as
with non-profit organizations including the W.M. Keck Foundation and Claremont
McKenna College provides our Board with the benefit of his perspectives on
business, corporate governance and citizenship.

MARIANN
BYERWALTERIndependent

Age
56Director
since 2015Board committees:
Audit

Career Highlights:Director, and from January 2016 to July
2016, Interim Chief Executive Officer and President of Stanford
Healthcare. Chairman of the Board of Directors of SRI International, an
independent nonprofit technology research and development organization,
since January 2014, and Chairman of JDN Corporate Advisory, LLC, a
privately held advisory services firm, since 2001. From 1996 to 2001, she
served as the Chief Financial Officer, Vice President for Business Affairs
and Special Assistant to the President of Stanford University. Partner and
co-founder of American First Financial Corporation from 1987 to 1996.
Director, Redwood Trust, Inc. and WageWorks, Inc. Previously trustee of
various investment companies affiliated with Charles Schwab
Corporation.

Key Attributes,
Experience and Skills:Ms.
Byerwalters significant financial expertise provides the Board with valuable
perspectives on finance, accounting and investment management matters. From her
leadership roles at Stanford University and several financial institutions she
has a deep understanding of accounting and strategic planning as well as
wide-ranging management expertise. Ms. Byerwalters current and prior service on
the boards of private and public companies as well as with non-profit
organizations including SRI International, Pacific LifeCorp and Pacific Mutual
Holding Company, Burlington Capital Group, Stanford Hospital & Clinics,
Lucile Packard Childrens Hospital, and the Stanford University Board of
Trustees also provides our Board with the benefit of her perspectives on
business, corporate governance and citizenship.

Career Highlights:Founder and Managing Member of Tano
Capital, a California based family office and alternative asset management
firm, with offices in Singapore, Mumbai, Mauritius and the San Francisco
Bay Area, since 2004. Director of a subsidiary of the Company. Formerly,
Co-President of the Company and an officer and/or director of certain
subsidiaries of the Company.

Key Attributes, Experience and Skills: Mr. C. E. Johnsons experience as founder and
Managing Member of Tano Capital and as a director of Company subsidiary Darby
Overseas Investments, Ltd., provides the Board with wide-ranging expertise and
insights into alternative asset management and the global fund management
industry. He also contributes extensive knowledge of the Company as a result of
spending over 20 years of his career working in various positions at the Company
and its subsidiaries, including serving as a co-president of the Company from
1999 to 2002 and Chief Executive Officer and President of Company subsidiary
Templeton Worldwide Inc. from 1994 to 2002. While serving in those roles, Mr. C.
E. Johnsons responsibilities included global oversight of all portfolio
management, information technology, product development and mergers and
acquisitions. He is a Certified Public Accountant and also serves on various
non-profit boards, including the Addiction Education Society, the South San
Francisco chapter of the Salvation Army rehabilitation center and the Carolands
Preservation Foundation.

GREGORY E.
JOHNSON

Age
55Director
since 2007Board committees:Special Awards

Career Highlights:Chairman of the Board since June 2013
and Chief Executive Officer of the Company since January 2004; President
from December 1999 to October 2015. Officer and/or director of certain
subsidiaries of the Company; officer and/or director or trustee of 44
registered investment companies managed or advised by subsidiaries of the
Company.

Key Attributes, Experience and Skills:Mr. G. Johnson brings leadership and extensive
business and operating experience, as well as significant knowledge of our
Company and the global fund management industry, to the Board. Mr. G. Johnson is
a Certified Public Accountant and prior to joining the Company, was a senior
accountant with Coopers & Lybrand. Over his 30-year tenure with the Company,
Mr. G. Johnson has held officer and director positions with various subsidiaries
of the Company; hands-on experience that provides him with in-depth knowledge of
the Companys operations. Mr. G. Johnsons presence on the Board provides the
Board with managements current perspectives on the Companys business and
strategic vision for the Company. Mr. G. Johnsons service on various boards of
industry organizations, including the Investment Company Institutes Board of
Governors, also provides the Board with the benefit of additional perspectives
on industry developments, including regulatory and policy issues. He is a past
Chairman and is currently serving as Vice Chairman of the Investment Company
Institute.

RUPERT H. JOHNSON,
JR.

Age
76Director
since 1969

Career Highlights:Vice Chairman of the Company since
December 1999; officer and/or director of certain subsidiaries of the
Company; officer and/or director or trustee of 40 registered investment
companies managed or advised by subsidiaries of the
Company.

Key Attributes, Experience and Skills: Mr. R. Johnsons service as Vice Chairman of
the Company and as an officer, director or trustee of various subsidiaries of
the Company and Franklin Templeton mutual funds since its inception provide the
Board with significant knowledge of and insights into the Company and the global
fund management industry in which we operate. His fundamental knowledge of the
Company gained over 50 years gives him an important perspective on the Company
and provides significant leadership, business and operational expertise to the
Board. Mr. Johnson has served on various industry boards and committees
addressing investment company issues including the Board of Governors of the
Investment Company Institute. In his capacity with the Company, he has served as
Director of Research and is a portfolio manager for one of its funds. He
provides the Board with a unique perspective on critical components of the
Companys business.

Career Highlights:Executive Chairman of PACCAR Inc., a
global technology company in the capital goods and financial services
industries, since April 2014. Formerly, Chairman and Chief Executive
Officer from January 1997 to April 2014. Formerly, Vice Chairman from
January 1995 to December 1996, Executive Vice President from December 1993
to January 1995, Senior Vice President from January 1990 to December 1993,
and Vice President from October 1988 to December 1989, of PACCAR Inc.
Director, PACCAR Inc.

Key Attributes, Experience and Skills: Mr. Pigotts experience leading PACCAR Inc., a
Fortune 200 company, provides the Board with valuable perspectives on financial,
operational and strategic matters. Mr. Pigott has been recognized several times
as one of the 10 Best CEOs by Forbes magazine. Under his leadership, PACCAR has
generated superior long term shareholder returns and received 30 J.D. Power
Customer Satisfaction Awards. He brings substantial expertise in the areas of
client service and customer satisfaction. As the leader of a major global
company, Mr. Pigott developed a deep understanding of issues associated with
operating in multiple jurisdictions. His service on several boards including the
Royal Shakespeare Company America and the PACCAR Foundation, as well as his
service on the board of PACCAR, provides our Board with the benefit of his views
on business, corporate governance and citizenship, finance and compensation
matters.

CHUTTA
RATNATHICAMIndependent

Age
69Director
since 2003Board committees: Audit
(Chair)

Career Highlights:Retired Senior Vice President and Chief
Financial Officer of CNF Inc., a freight transportation, logistics, supply
chain management and trailer manufacturing company, from 1997 to March
2005; formerly, Chief Executive Officer of the Emery Worldwide reporting
segment of CNF from September 2000 to December
2001.

Key Attributes, Experience and Skills:Mr. Ratnathicams experience of over 27 years
in various accounting, finance and executive management roles, including as the
Chief Financial Officer at CNF, Inc., provides the Board with significant
expertise in the areas of finance, accounting, strategic planning and auditing.
Mr. Ratnathicam has held finance and other management positions internationally,
and has a keen understanding of the issues facing a multinational business such
as the Company. He is on the Advisory Board of Namaste Direct, a micro finance
organization, and qualifies as an audit committee financial expert under the
rules and regulations of the SEC.

Career Highlights:Executive Vice PresidentGeneral Counsel
and Corporate Affairs of The Clorox Company, a leading marketer and
manufacturer of consumer products, since February 2016; formerly Executive
Vice President  General Counsel from February 2015 to February 2016 and
Senior Vice President  General Counsel from January 2005 to February 2015
of The Clorox Company; formerly, Senior Vice President and General Counsel
of H.J. Heinz Company, a global marketer and manufacturer of branded food
products, from 2000 to 2005. Director, Canadian National Railway
Company.

Key Attributes, Experience and Skills: As general counsel of two multinational
corporations, with responsibility for legal, compliance, corporate governance,
risk management, corporate responsibility, and internal audit, among other
matters, Ms. Stein brings expertise in these critical areas to the Board. Ms.
Stein speaks six languages and has lived in non-US jurisdictions, bringing a
global perspective and experience. She has a deep understanding of financial
statements, corporate finance, and accounting. In addition, Ms. Steins
leadership and service on the boards of non-profit organizations including
Corporate Pro Bono, Equal Justice Works and the Leadership Council on Legal
Diversity also provide the Board with the benefit of additional perspectives on
diversity and corporate citizenship.

Career Highlights:Non-executive chairman of Alex. Brown, a
division of Raymond James, since September 2016. Vice Chairman of Florida
East Coast Industries, LLC, the parent company of several commercial real
estate, transportation and infrastructure companies based in Florida,
since 2013. From 2000 to 2013, Mr. Waugh served in various roles at
Deutsche Bank Americas, including Chief Executive Officer and Chairman of
the Board of Directors of Deutsche Bank Securities Inc. Previously Chief
Executive Officer of Quantitative Financial Strategies, a hedge fund. Mr.
Waugh also served in various capacities at Merrill Lynch over eleven
years, including Co-head of Global Debt
Markets.

Key Attributes, Experience and
Skills:Mr. Waughs
significant experience in the financial sector provides the Board with valuable
perspectives on capital markets and investment management. Having held various
leadership roles at Deutsche Bank and other financial institutions, Mr. Waugh
brings strong leadership skills as well as deep knowledge of operational and
strategic matters to the Board. His service on the boards of the Deutsche Bank
Americas Advisory Board, the Deutsche Bank Americas Foundation, The Clearing
House, the Financial Services Forum and the Board of Governors of the Financial
Industry Regulatory Authority, Inc. (FINRA) provides our Board with the benefit
of his substantial expertise in financial industry developments and corporate
citizenship.

Career Highlights:Managing Director and Founding Partner
of Redpoint Ventures, a private equity and venture capital firm, since
1999. Director of AT&T, Inc. since June 2016. Formerly, General
Partner with Institutional Venture Partners from 1987 to 1999. Mr. Yang is
a past president of the Western Association of Venture Capitalists,
director of the National Venture Capital Association, chairman of the
Stanford Engineering Fund, and a member of the Presidents Information
Technology Advisory Committee. Previously director of BigBand
Networks.

Key Attributes, Experience and
Skills:Mr. Yangs
experience as a Founding Partner and Managing Director of Redpoint Ventures
provides the Board with valuable perspectives on financial and strategic matters
as well as expertise in the capital markets. Since joining the venture capital
business in 1985, Mr. Yang has helped start many media and infrastructure
companies, including Ask Jeeves, Excite, MySpace, Foundry Networks and Juniper
Networks. This experience provides strategic direction, growth and technology
expertise to the Company. Mr. Yangs current and prior service on the boards of
several private and public companies as well as with non-profit organizations
including the Advisory Council for the Stanford Graduate School of Business, the
United States Golf Association and the United States Olympic and Paralympic
Foundation, provides our Board with the benefit of his perspectives on business,
corporate governance and citizenship, and finance.

FAMILY
RELATIONSHIPSGregory E. Johnson,
the Chairman of the Board, Chief Executive Officer and a director of the
Company, is the nephew of Rupert H. Johnson, Jr., Vice Chairman and a director
of the Company, the brother of Charles E. Johnson, a director of the Company and
Jennifer M. Johnson a Co-President of the Company. Charles E. Johnson is the
nephew of Rupert H. Johnson, Jr. and the brother of Gregory E. Johnson and
Jennifer M. Johnson. Jennifer M. Johnson is the niece of Rupert H. Johnson, Jr.
and the sister of Gregory E. Johnson and Charles E. Johnson.

The Corporate Governance Committee of the
Board recommended and nominated, and the Board approved, the nominees named
above for election as members of the Board. Each nominee was elected by the
Companys stockholders at the Companys last annual meeting of stockholders and,
accordingly, is standing for re-election.

The Corporate Governance Committee and the
Board believe that the nominees have the requisite experience, qualifications,
attributes and skills to provide the Company with effective oversight of a
global investment management organization. The Corporate Governance Committee
and the Board believe that there are general requirements and skills that are
required of each director and other skills and experience that should be
represented on the Board as a whole but not necessarily by each director. The
Board believes that, consistent with these requirements, each nominee displays a
high degree of personal and professional integrity, an ability to exercise sound
business judgment on a broad range of issues, sufficient experience and
background to have an appreciation of the issues facing our Company, a
willingness to devote the necessary time to board duties, a commitment to
representing the best interest of the Company and its stockholders and a
dedication to enhancing stockholder value. The Board seeks to assemble a group
of directors that, as a whole, represents a mix of experiences and skills that allows appropriate deliberation on all issues
that the Board might be likely to consider. The Corporate Governance Committees
Policy Regarding Nominations and Qualifications of Directors described below
outlines the qualities that the Corporate Governance Committee and the Board
seek in director nominees.

If elected, each nominee will serve until
the next annual meeting of stockholders or until that persons successor is
elected and qualified or until his or her earlier death, resignation,
retirement, disqualification or removal.

In accordance with the Companys Director
Independence Standards, described more fully below, and the rules of the NYSE,
the Board has affirmatively determined that it is currently composed of a
majority of independent directors, and that the following director nominees are
independent and do not have a material relationship with the Company: Peter K.
Barker; Mariann Byerwalter, Mark C. Pigott; Chutta Ratnathicam; Laura Stein;
Seth H. Waugh and Geoffrey Y. Yang. The Board reaffirmed Mr. Waughs
independence in connection with his appointment as non-executive chairman of
Alex. Brown, a division of Raymond James, in September 2016. The Board has also
determined that Mr. Waugh remains an outside director for purposes of Section
162(m) of the Internal Revenue Code of 1986, as amended (the Code).

The Company regularly monitors regulatory
developments and reviews its policies and procedures in the area of corporate
governance to respond to such developments. As part of those efforts, we review
federal laws affecting corporate governance, as well as corporate
governance-related rules adopted by the SEC and the NYSE.

Corporate Governance
Guidelines. The Board has adopted Corporate
Governance Guidelines, which are posted in the corporate governance section of
the Companys website at www.franklinresources.com (the
Companys website). The Corporate Governance Guidelines set forth the
practices the Board follows with respect to, among other things, the composition
of the Board, director responsibilities, Board committees, director access to
officers, employees and independent advisers, director compensation, director
orientation and continuing education, management succession and performance
evaluation of the Board.

Code of Ethics and
Business Conduct. The Board has adopted a
Code of Ethics and Business Conduct, which is applicable to all employees,
temporary employees, directors and officers of the Company and its subsidiaries
and affiliates. The Code of Ethics and Business Conduct is posted in the
corporate governance section of the Companys website. The Company also has a
Compliance and Ethics Hotline, where employees can report a violation of the
Code of Ethics and Business Conduct or anonymously submit a complaint concerning
auditing, accounting or securities law matters. We intend to satisfy the
disclosure requirement regarding any amendment to or a waiver of, a provision of
the Code of Ethics and Business Conduct for the Companys principal executive
officer, principal financial officer, principal accounting officer and
controller, or persons performing similar functions, by posting such information
on the Companys website.

Director Independence
Standards. The Board has adopted guidelines
for determining whether a director is independent, which are available on the
Companys website. The Board will monitor and review as necessary, but at least
once annually, commercial, charitable, family and other relationships that
directors have with the Company to determine whether the Companys directors are
independent.

For a director to be considered
independent, the Board must determine affirmatively that the director does not
have material relationships with the Company either directly or as a partner,
stockholder or officer of an organization that has a relationship with the
Company. Such determination will be made and disclosed pursuant to applicable
NYSE or other applicable rules. A material relationship can include, but is not
limited to, commercial, industrial, banking, consulting, legal, accounting,
charitable and family relationships. The Board has established the following
guidelines to assist it in determining whether a director does not have material
relationships and thereby qualifies as independent:

A.

A director will not be independent if, at any time within the
preceding three years (unless otherwise specified below):

1.

(a)

the
director was employed by the Company; or

(b)

an immediate family
member1 of the director was
employed by the Company as an executive officer2 of the Company;

2.

the director
(or an immediate family member of the director who in the capacity of an
executive officer of the Company) received direct compensation from the
Company (other than for prior service as a director, or as pension or
deferred compensation) of more than $120,000 in any 12-month
period;

3.

(a)

the
director or an immediate family member of the director is currently a
partner of the Companys internal auditor or external independent
auditor;

(b)

the director is
currently employed by the Companys internal auditor or external
independent auditor;

(c)

an immediate family
member of the director is currently employed by the Companys internal
auditor or external independent auditor and personally works on the
Companys audit; or

(d)

the director or an
immediate family member of the director was formerly employed by or a
partner of the Companys internal auditor or external independent auditor
and personally worked on the Companys audit within that
time;

1

An immediate family member
includes a spouse, parent, child, sibling, father- and mother-in-law, son-
and daughter-in-law, brother- and sister-in-law and anyone (other than a
domestic employee) sharing the directors home.

2

An executive officer means a
Section 16 reporting person under the Securities Exchange Act of 1934, as
amended.

the director or an immediate family member of the director was
employed by another company and an executive officer of the Company served
on the compensation committee of such other company; or

5.

(a)

the
director is an employee of a company that made payments to or received
payments from the Company for property or services, in any single fiscal
year, of more than the greater of $1.0 million or 2% of the other
companys consolidated gross revenues;

(b)

an immediate family
member of the director is an executive officer of a company that made
payments to or received payments from the Company for property or
services, in any single fiscal year, of more than the greater of $1.0
million or 2% of the Companys consolidated gross revenues;
or

(c)

the director or an
immediate family member of the director serves as an officer, director or
trustee of a tax exempt organization, and the Companys contributions to
the organization, in any single fiscal year, are more than the greater of
$3.0 million or 5% of that organizations consolidated gross
revenues.

B.

The
following relationships are not by themselves considered to be material
and would not by themselves impair a directors independence:

1.

a director (or an immediate family member of the director) serves
as an executive officer, employee, partner or significant owner (more than
10%) of a company that made payments to or received payments from the
Company, in any single fiscal year, of less than the greater of $1.0
million or 2% of the consolidated gross revenues of the other
entity;

2.

a director is an executive officer of another company, which is
indebted to the Company, or to which the Company is indebted, and the
total amount of either companys indebtedness to the other, in any single
fiscal year, is less than 2% of the total consolidated assets of the other
company;

3.

a director (or an immediate family member of a director) serves as
an officer, director or trustee of a tax exempt organization, and the
Companys contributions to the organization, in any single fiscal year,
are more than the greater of $1.0 million or 2% of that organizations
consolidated gross revenues, provided that such contributions do not
exceed the limits set forth in Paragraph A.5(c) above and that disclosure
is made in the Companys annual proxy statement;

4.

a director serves or served as a director of a subsidiary, which is
a privately held, wholly-owned, direct or indirect subsidiary of the
Company;

5.

a director or an immediate family member of a director has entered
into a transaction(s) with the Company or any affiliate of the Company in
which the transaction(s) involves services as a bank depositary of funds,
transfer agent, registrar, trustee under a trust indenture or similar
services, provided the terms of such transaction(s) are not preferential
to the terms for similar transactions by the Company or affiliate of the
Company in the ordinary course; or

6.

a director or an immediate family member of a director maintains a
trading, investment management, custody or other account with an affiliate
of the Company, provided the terms of such account are generally the same
as or similar to accounts offered by the affiliate of the Company in the
ordinary course.

C.

For all
relationships not specifically and clearly addressed by the guidelines
above, the determination of whether or not a director has a material
relationship, and therefore whether or not the director qualifies as
independent or not, shall be made by the Board based on the totality of
circumstances.

Policy Regarding Multiple
Board Memberships. The Board has adopted,
upon the recommendation of the Corporate Governance Committee, a policy
regarding memberships on boards of directors or equivalent governance bodies of
unaffiliated publicly traded companies or other entities. If a member of the
Board also serves as the principal executive officer, such as the Chief
Executive Officer or President, of a publicly traded company, it is the policy
of the Board that such Board member shall not accept membership on a board of
directors or equivalent governance body of another publicly traded company,
without first informing and obtaining the consent of the Companys Corporate
Governance Committee, if such new membership would result in the member serving
contemporaneously on three or more boards of directors or equivalent governance
bodies of unaffiliated publicly traded companies, excluding the Companys Board.
If a member of the Board does not serve as a principal executive officer, such
as a Chief Executive Officer or President, of a publicly traded company, it is
the policy of the Board that such Board member shall not accept membership on a
board of directors or equivalent governance body of another publicly traded
company, without first informing and obtaining the consent of the Companys
Corporate Governance Committee, if such new membership would result in the
member serving contemporaneously on four or more boards of directors or
equivalent governance bodies of publicly traded companies, excluding the
Companys Board.

Prohibition against
Hedging Transactions. Pursuant to the
Companys Code of Ethics and Business Conduct, which is applicable to all
employees, temporary employees, directors and officers of the Company and its
subsidiaries and affiliates, short sales of securities, including short sales
against the box (i.e., a short sale by the holder of a long position in the
same stock) of securities issued by the Company, and securities issued by any
closed-end fund sponsored or advised by the Company are prohibited. This
prohibition also applies to effecting economically equivalent transactions,
including, but not limited to purchasing and selling call or put options and
swap transactions or other derivatives that would result in a net short exposure
to the Company or any closed-end fund sponsored or advised by the
Company.

Stock Ownership
Guidelines. As a significant ownership
interest by directors in the Company tends to align the interests of members of
the Board with the interests of the Companys
stockholders, as of October 20, 2014, all directors on the Board were expected
to own shares of common stock of the Company with a value of at least 5x the
value of their annual cash retainer; provided, however, that Board members who
have not yet served for 5 years on the Board, will be expected to meet the
required ownership level within 5 years of their appointment to the Board.
Similarly, as a significant ownership interest by certain senior officers in the
Company tends to align the interests of members of management of the Company
with the Companys stockholders and to strengthen the link between long-term
Company performance and executive compensation, senior officers of the Company
are expected to own shares of common stock of the Company with a value equal to
a specific multiple of such senior officers base salary, as indicated in the
table below, by five years from when he or she first assumed the particular
senior officer position for which stock ownership is expected:

Senior Officer Level

Market Value of Shares Owned as a Multiple
of Base Salary

Chairman

5X

Vice Chairman

5X

Chief Executive Officer

5X

President and Co-President

4X

Executive Vice President

4X

Senior Vice President

3X

Both direct and certain indirect forms of
ownership are recognized in achieving these guidelines, including shares owned
outright, restricted stock, restricted stock units, 401(k) funds invested in
shares of the Companys stock, and funds deemed invested in shares of common
stock under the 2006 Directors Deferred Compensation Plan. Shares of common
stock held by immediate family members (which includes a directors or senior officers spouse, children and parents)
or entities controlled by a director or senior officer may be considered
holdings of the director or senior officer for purposes of the guidelines only
and not as an admission of beneficial ownership for any other purpose. As of
December 31, 2016, all directors and officers were in compliance with these
guidelines.

During fiscal year 2016, the Board held
five meetings (not including committee meetings). For fiscal year 2016, the
directors attended 96% of the aggregate of the total number of meetings held by
the Board and the total number of meetings held by all committees of the Board
on which a Director served during the periods that he or she served.

To promote open discussion among the
independent directors, the independent directors meet in executive session at
least two times per year and generally meet in executive session after regularly
scheduled Board meetings. Peter K. Barker, the independent Lead Director,
presides at the executive sessions of the independent directors. The Board
encourages directors to attend the annual meeting of stockholders. All of the
directors then standing for election attended last years annual
meeting.

Committee Membership
and Meetings

The current standing committees of the
Board are the Audit Committee, the Compensation Committee, the Corporate
Governance Committee and the Special Awards Committee. The table below provides
current membership and meeting information.

Audit

Compensation

CorporateGovernance

SpecialAwards

Peter K. Barker



C





Mariann Byerwalter

M







Gregory E.
Johnson







M

Mark C. Pigott



M

M



Chutta
Ratnathicam

C







Laura Stein

M



C



Seth H. Waugh



M





Geoffrey Y. Yang

M



M



Fiscal year 2016 Meetings

7

7

6



*

MMemberCChairman

*

Mr. G. Johnson is the sole
member of the Special Awards Committee. This Committee takes actions by
written consent in lieu of meeting.

Below is a description of each standing
committee of the Board. The Board has affirmatively determined that each of
these standing committees (other than the Special Awards Committee) consists
entirely of independent directors pursuant to rules established by the NYSE,
rules promulgated under the Securities Exchange Act of 1934, and the Director
Independence Standards established by the Board. See Director Independence
Standards above. The Board has also determined that each member
of the Audit Committee and the Compensation Committee is independent under the
criteria established by the NYSE and the SEC for audit committee and
compensation committee members, as applicable, and under the applicable
requirements for Code Section 162(m) with respect to the members of the
Compensation Committee.

Established in accordance with Section
3(a)(58)(A) of the Securities Exchange Act of 1934, the Audit Committee
currently consists of Messrs. Ratnathicam (Chairman) and Yang and Mss.
Byerwalter and Stein.

The primary purpose of the Audit Committee
is to assist the Board in fulfilling its responsibility to oversee: (1) the
Companys financial reporting, auditing and internal control activities,
including the integrity of the Companys financial statements; (2) the Companys
compliance with legal and regulatory requirements; (3) the independent auditors
qualifications and independence; and (4) the performance of the Companys
internal audit function and independent auditors. The Audit Committee also
prepares the report the Audit Committee is required to include in the Companys
annual proxy statement. In addition, the Audit Committee is responsible for the
appointment, compensation, retention and oversight of the work of the
independent auditors, including approval of all services and fees of the
independent auditors. The Audit Committee meets with the Companys independent
auditors and reviews the scope of their audit, the
related reports and any recommendations they may make. The Audit Committee also
reviews the annual audited financial statements for the Company. In addition,
the Audit Committee assists the Board in the oversight of the Companys risk
management processes (as described more fully below under Risk Management and
the Boards Role in Risk Oversight).

The Audit Committee operates under a
written charter adopted by the Board. The Audit Committee reviews and reassesses
the adequacy of its charter annually and recommends any proposed changes to the
Board for approval. The Audit Committee met seven times during fiscal year 2016.
The Audit Committee Charter is posted in the corporate governance section of the
Companys website at www.franklinresources.com/corp/pages/generic_content/
corporate_governance/audit_committee_charter.jsf. The Board has determined that all Audit Committee members are
financially literate under the NYSE listing standards and that Mr. Chutta
Ratnathicam is an audit committee financial expert within the meaning of the rules of
the SEC.

The Compensation
Committee

The Compensation Committee currently
consists of Messrs. Barker (Chairman), Pigott and Waugh. The Compensation
Committee oversees the establishment of goals and objectives related to Chief
Executive Officer compensation, determines the compensation level of the Chief
Executive Officer, assists the Board in fulfilling its responsibility relating
to the compensation (and related benefits) of the executive officers of the
Company, discharges the responsibilities of the Board relating to compensation
of the Companys executives and prepares the annual report on executive officer
compensation for the Companys proxy statement. The Committee also reviews and
discusses with management proposed Compensation Discussion and Analysis
disclosure and determines whether to recommend it to the Board for inclusion in
the Companys proxy statement. In addition, the Compensation Committee reviews
and approves compensation arrangements between the Company and members of its
Board of Directors. The Compensation Committee met seven times in during fiscal
year 2016. The Compensation Committee may delegate any of its responsibilities
to subcommittees as it deems appropriate.

The Compensation Committee generally
adheres to the following processes and procedures in connection with the
consideration and determination of the compensation of the Companys executive
officers and directors.

Determination of
Executive Compensation. The Compensation Committee meets periodically throughout the year
to (i) review and approve corporate goals and objectives relevant to the
compensation of the executive officers, (ii) evaluate the performance of the
executive officers in light of those goals and objectives, and (iii) determine
and approve the compensation of the executive officers. For a detailed
description regarding the Compensation Committees role in setting executive
compensation, including the role of executive officers in the process, see
Compensation Discussion and Analysis below.

Determination of Director
Compensation. The Compensation Committee
meets at least annually to review and make recommendations to the Board on the
compensation (including equity-based compensation) of the Companys
non-executive directors. In reviewing and making recommendations on
non-executive director compensation, the Committee considers, among other
things, the following policies and principles:

●

that the compensation should fairly pay the
directors for the work, time commitment and efforts required by directors
of an organization of the Companys size and scope of business activities,
including service on Board committees;

that a component of the compensation
should be designed to align the directors interests with the long-term
interests of the Companys stockholders; and

●

that directors independence may be
compromised or impaired for Board or committee purposes if director
compensation exceeds customary levels.

As a part of its review, the Compensation
Committee receives a report of its independent consultant on comparable
non-executive director compensation practices and levels. No executive officer
of the Company is involved in determining or recommending non-executive director
compensation levels. For a description regarding the role and scope of
assignment of the Compensation Committees compensation consultant see
Compensation Discussion and Analysis below. See the section of this Proxy
Statement entitled Director Fees below, for a discussion of compensation paid
to the Companys directors during fiscal year 2016. Directors who are executives of the Company do not receive compensation for
their Board service. The Compensation Committee did not recommend any increases
to non-executive director compensation in either fiscal year 2015 or
2016.

The Compensation Committees charter
reflects these various responsibilities, and the Compensation Committee and the
Board of Directors annually review the charter, and revise it as necessary or
appropriate. The Compensation Committee Charter is posted in the corporate
governance section of the Companys website at www.franklinresources.com/corp/
pages/generic_content/corporate_governance/compensation_
committee_charter.jsf.

The Special Awards Committee

The sole member of the Special Awards
Committee is Mr. Gregory E. Johnson. The Committee has separate but concurrent
authority with the Compensation Committee to make certain limited equity and
cash awards to employees of the Corporation and its subsidiaries who are not
executive officers subject to Section 16 of the Securities Exchange Act of
1934.

The Corporate Governance
Committee

The Corporate Governance Committee
currently consists of Ms. Stein (Chairperson) and Messrs. Pigott and
Yang.

The Corporate Governance Committee has the
responsibilities set forth in its charter and provides counsel to the Board of
Directors with respect to the organization, function and composition of the
Board and its committees and oversees the evaluation of the Board and the
committees. The Corporate Governance Committee is also responsible for
developing and recommending to the Board corporate governance policies and
procedures applicable to the Company and reviewing the anti-money laundering
policies, procedures and operations of the Company on a periodic basis. The
Committee is also tasked with identifying and recommending to the Boards
independent directors potential Lead Director candidates from among the
independent directors. The Corporate Governance Committee met six times during
fiscal year 2016. The Corporate Governance Committee Charter is posted in the
corporate governance section of the Companys website at www.franklinresources.
com/corp/pages/generic_content/corporate_governance/
corporate_governance_charter.jsf.

The Corporate Governance Committee is
responsible for identifying and recommending to the Board potential director
candidates for nomination and election to the Board at the annual meeting of
stockholders. It uses a variety of means as it determines are necessary or
appropriate, including recommendations of stockholders, to do so. The Corporate
Governance Committee has adopted a policy regarding nominations and
qualifications of directors, which has been approved by the Board. Under such
policy, the Corporate Governance Committee may solicit recommendations from
current and former directors, management or others who may be familiar with
qualified candidates, and may consider current directors for re-nomination. The
Corporate Governance Committee may, in its sole discretion, retain and terminate
any search firm (and approve such search firms fees and other retention terms)
to assist in the identification of candidates.

The Corporate Governance Committee
believes there are certain minimum skills and qualifications that each director
nominee must possess or satisfy, including:

significant achievement in business,
finance, government, education, law, technology or other fields important
to the operation of the Company;

●

the ability to exercise sound
business judgment on a broad range of issues;

●

sufficiently broad experience and
professional and educational background to have a general appreciation of
the major issues facing public companies of a size and scope similar to
the Company;

●

the willingness and ability to
devote the necessary time to Board duties, including preparing for and
attending meetings of the Board and its committees;
and

●

being prepared to represent the best
interests of the Company and its stockholders and committed to enhancing
stockholder value.

The Corporate Governance Committee also
believes there are other skills and qualifications that at least one or more
directors must possess or satisfy, including:

●

experience and knowledge of the
industry sector in which the Company operates its
business;

●

a majority of the directors being
independent directors in accordance with the corporate governance
listing standards of the NYSE;

●

at least three directors meeting the
additional independence requirements for members of the Audit Committee of
the Board in accordance with the applicable rules of the
NYSE;

●

at least three directors who are
eligible to serve on the Audit Committee of the Board being financially
literate or capable of becoming financially literate within a
reasonable period of time;

●

at least one director who is
eligible to serve on the Audit Committee of the Board being an audit
committee financial expert in accordance with applicable rules of the
SEC;

●

at least three directors meeting the
additional independence requirements for members of the Compensation
Committee of the Board in accordance with the applicable rules of the
NYSE; and

●

other standards the Board may adopt
from time to time.

In considering candidates for director
nominee, the Corporate Governance Committee generally assembles information
regarding a candidates background and qualifications, evaluates a candidates
mix of skills and qualifications and determines the contribution the candidate
could be expected to make to the overall functioning of the Board, giving due
consideration to the overall Board balance of diversity of perspectives,
backgrounds and experiences. The Corporate Governance Committee reviews annually
with the Board the composition of the Board as a whole, including whether the
Board reflects the appropriate balance of
independence, sound judgment, business specialization, technical skills,
diversity and other desired qualities.

With respect to current directors, the
Corporate Governance Committee considers past attendance at meetings and
assesses participation in and contributions to the activities of the Board. The
Corporate Governance Committee, in its discretion, may designate one or more of
its members to interview any candidate. In addition, the Corporate Governance
Committee may seek input from the Companys management or the Board, who may
interview any candidate. The Corporate Governance Committee recommends director
nominees to the Board based on its assessment of overall suitability to serve on
the Board in accordance with the Companys policy regarding nominations and
qualifications of directors.

The Corporate Governance Committee will
consider candidates recommended for nomination to the Board by stockholders of
the Company. Stockholders may make such a recommendation by submitting a
completed Director Nomination Form, which is posted in the corporate governance
section of the Companys website, not later than the close of business on the
120th day nor earlier than the close of business on the
150th day prior to the first anniversary of the date on which the
Company first (i) mailed its notice of annual meeting, proxy statement and proxy
or (ii) sent its notice of annual meeting and notice of internet availability of
its proxy materials, whichever is earlier, for the immediately preceding years
annual meeting. Completed Director Nomination Forms shall be sent to: Corporate
Governance Committee, Franklin Resources, Inc., c/o Maria Gray, Secretary, One
Franklin Parkway, San Mateo, CA 94403-1906. This year our Proxy Statement is
dated January 4, 2017; for a recommendation to be properly made for the 2018
annual meeting, we must receive the notice of recommendation between August 7,
2017 and September 6, 2017.

The manner in which the Corporate
Governance Committee evaluates candidates recommended by stockholders is
generally the same as any other candidate. However, the Corporate Governance
Committee will also seek and consider information concerning any relationship
between a stockholder recommending a candidate and the candidate to determine if
the candidate can represent the interests of all of the stockholders. The
Corporate Governance Committee will not evaluate a candidate recommended by a
stockholder unless the Director Nomination Form provides that the potential
candidate has indicated a willingness to serve as a director, to comply with the
expectations and requirements for Board service as publicly disclosed by the
Company and to provide all of the information necessary to conduct an
evaluation.

Mr. Gregory E. Johnson, our Chief
Executive Officer (CEO), has served as Chairman of the Board since June 2013.
The Board believes the current structure is appropriate because having a single
leader for both the Company and the Board provides clear leadership for the
strategic vision, management and operations of our Company. The Board believes
that this leadership structure strengthens the Boards ability to focus on key
risk, business and strategic issues and helps the Company operate in the
long-term interests of shareholders. Mr. Peter K. Barker, an independent
director, has been selected by the independent directors as Lead Director. The
duties of the Lead Director are set forth in the Lead Director Charter available
on the Companys website at www.franklinresources.com/corp/
pages/generic_content/corporate_governance/lead_director_
charter.jsf and include:

●

presiding at the executive sessions
of the independent directors and of the non-employee directors of the
Board;

●

presiding at meetings of the Board
in the absence of the Chairman and Vice Chairman of the Board or upon the
request of the Chairman;

●

calling meetings of the independent
directors and non-employee directors of the Board, as
appropriate;

●

serving as a liaison to facilitate
communications between other members of the Board and the Chairman, the
Vice Chairman, the CEO and the Co-Presidents, without inhibiting direct
communications between and among such persons;

●

advising and consulting with the
Chairman and CEO on, and approving, Board and committee meeting schedules,
including the need for special meetings as appropriate, and Board and
committee meeting agenda items, to help ensure that appropriate items are
brought forward for Board and committee consideration and appropriate time
is apportioned for discussion;

●

advising and consulting with the
Chairman and CEO on the general scope and type of information to be
provided in advance and/or to be presented at Board
meetings;

●

in coordination with the Chairman
and CEO, serving as a liaison to stockholders who request direct
communications and consultation with the Board or otherwise delegating
such task to an appropriate member of the Board based on the
circumstances;

●

consulting with outside counsel and
other advisors as he or she deems appropriate in fulfilling the Lead
Director role;

●

collaborating with the Compensation
Committee on the annual performance evaluation of the CEO;
and,

●

collaborating with the Corporate
Governance Committee on matters related to Board effectiveness and
independence including the performance and structure of the Board and its
committees, and the performance of individual
directors.

While the Board does not have a fixed
policy regarding the separation of the offices of the Chairman and Chief
Executive Officer, the Corporate Governance Committee reviews the Boards
leadership structure annually with the Board.

Risk Management and the
Boards Role in Risk Oversight

Our Company recognizes the importance of
effective risk management to the success of our business and our stockholders
and has long-standing and highly developed structures in place to manage risk.
The Board of Directors has principal responsibility for oversight of the
Companys risk management processes. The Board regularly receives information on
risks facing the Company from, and provides oversight to, a variety of
management groups, including the enterprise risk management, global compliance,
internal audit, finance risk and control and compensation risk review groups.
These groups provide reports either directly to the full Board, or to the Audit
Committee or Compensation Committee. Each of these Board committees is comprised
solely of independent directors and reports to the full Board at each Board meeting. Regional and separate key risk
committees of our management, as well as business and operational risk
functions, report to the enterprise-wide management groups which in turn report
to the full Board or a committee of the Board. Our internal audit and global
compliance groups conduct monitoring and testing of Company-wide policies and
procedures and report quarterly to the Audit Committee and Board of Directors,
respectively.

The full Board oversees the Companys
business continuity planning, reviewing and approving managements plans with
respect to, among other things, key management succession, disaster planning,
crisis management, and prioritization of recovery efforts. The Board also
reviews and approves

the Companys Corporate Liquidity Policy,
which addresses how the Company would respond to possible liquidity crises
created by temporary market disruptions and/or longer-term financial
distress.

The Audit Committee receives risk
management and internal audit reports at least quarterly and oversees enterprise
risk assessment and risk management policies and procedures. The full Board
receives reports of, and provides direction to, the enterprise-wide risk
management committee and internal auditor at least annually. The Compensation
Committee evaluates the Companys compensation policies and programs to ensure
they do not encourage excessive risk-taking. A management compensation risk
review committee (the CRRC), which reviews new and existing compensation
programs and practices to ensure that they do not encourage imprudent risk
taking or expose the Company to material amounts of risk, reports on its
findings to the Compensation Committee. As part of the CRRCs review of
compensation arrangements across the Company, the CRRC has undertaken a
comprehensive assessment of existing compensation programs and practices to
ensure that imprudent risk-taking is not encouraged and that appropriate risk
mitigation features are in place. The Audit Committee and the Compensation
Committee report on risk, along with other committee matters, at meetings of the
full Board.

At their meetings, the Board, Audit
Committee and Compensation Committee review and discuss identified risks with
the relevant members of senior management and members of the various groups with
responsibility for risk identification and management. These regular
communications provide the Board with a practical and in-depth understanding of
the risks facing the Company and enable the Board to provide direction to
management with respect to its approach to identifying, monitoring and
addressing material risks.

Our Boards role in risk oversight is
well-supported by having an experienced Chairman and Chief Executive Officer,
who has extensive knowledge of and experience with the risks that the Company
faces. In addition, the Audit, Compensation and Corporate Governance Committees
of the Board are composed entirely of independent directors, as described above
in Committee Membership and Meetings, which the Board believes also enhances
risk oversight.

Standard Board Fees.
For fiscal year 2016, directors who were not
employees of the Company were paid a retainer fee of $21,250 per quarter and an
annual equity grant valued at $125,000 (rounded up to the nearest whole share)
on the date of the annual organizational meeting of the Board.

Special Board Meeting
Fees. A special Board meeting fee of $5,000
is payable to each non-employee director for each Board meeting attended by such
director in excess of the five regularly scheduled Board meetings per fiscal
year. No special meetings were held in fiscal year 2016.

Standard Committee Fees.
Independent directors who served on Board
committees were paid $1,500 per committee meeting attended. In addition, the
Chairpersons of the Compensation Committee and the Corporate Governance Committee received $2,500 and the Chairperson of the Audit
Committee received $3,750 per quarter.

Lead Director Fee.
The Lead Director receives an annual retainer
fee of $20,000, payable in quarterly payments of $5,000.

Other Board Compensation.
The Company reimburses directors for certain
expenses incurred in connection with attending Board and Board committee
meetings as well as other Company-related events, including travel, hotel
accommodations, meals and other incidental expenses for the director and his or
her spouse accompanying the director in connection with such events. The Company
may also, from time to time, provide directors and their spousestoken gifts of nominal
value.

Deferred Director
Fees

The Company and its subsidiaries allow
non-employee directors to defer payment of their directors fees and stock
awards in a manner that is intended to comply with the provisions of Section
409A of the Code, and to treat the deferred amounts as hypothetical investments
in common stock of the Company and/or in Company sponsored mutual funds, as
selected by the director. Directors are then credited with the same earnings,
gains or losses that they would have incurred if the deferred amounts had been
invested in the specific investments, in the specific amounts and for the
specific periods as directed by each particular director. Additionally,
directors who defer their directors fees and stock awards are credited with notional dividends and other distributions
at the same time, in the same form, and in equivalent amounts as dividends and
other distributions that are payable from time to time with respect to
investments selected by each particular director. On the payout dates elected by
a director, the hypothetical investments are valued and the Company or its
subsidiary, as applicable, must pay the director or his or her beneficiary a
cash amount equal to the value of the hypothetical investments. Payouts may be
made in a lump sum or in periodic installments.

The following table details the total
compensation earned by the Companys directors in fiscal year 2016:

Fees include quarterly
retainer fees, committee meeting attendance fees and fees for service as a
committee chairman. Fees are awarded in cash, the payment of which may be
deferred pursuant to the 2006 Directors Deferred Compensation Plan (the
Directors Deferred Plan) described above in Deferred Director Fees.
Pursuant to the Directors Deferred Plan, directors may elect to defer
payment of their directors fees and stock awards into hypothetical
investments in common stock of the Company and/or in Company sponsored
mutual funds. If a director receives fees in cash or elects to defer fees
(including the annual stock grant) into hypothetical units of
Company-sponsored mutual funds, such amounts are included in this column.
Any such director fees deferred into hypothetical shares of the Companys
common stock are included in the Stock Awards column. See notes 2 and 3
below.

(2)

Stock Award amounts represent
the aggregate grant date fair value, recorded in accordance with the
requirements of Financial Accounting Standards Board Accounting Standards
Codification Topic 718, Compensation - Stock Compensation (ASC 718),
associated with (i) an annual stock grant made on February 17, 2016,
provided such stock grant is not deferred into hypothetical units of
Company sponsored mutual funds (see note 1 above), and (ii) director fees
earned in fiscal year 2016 but whose payment is deferred into hypothetical
shares of the Companys common stock and eventually payable in cash. See
Deferred Director Fees above. The valuation assumptions (i)
for the annual stock grant are the closing price for the common stock on
the NYSE on the grant date (February 17, 2016) and (ii) for the deferred
hypothetical Company common stock are changes in the closing price of the
common stock on the NYSE during fiscal year 2016, and the reinvestment of
dividends declared by the Company. Because of the required accounting
treatment under ASC 718, the Stock Award amounts for fees earned in fiscal
year 2016 and deferred into hypothetical shares of common stock may vary
(up or down) to reflect market prices of the common
stock.

(3)

The following represents the
grant date fair value for all Stock Awards received in fiscal year
2016:

Name

Actual CommonStock
($)

DeferredHypotheticalShares ($)

Peter K. Barker

125,000

125,000

Mariann
Byerwalter



125,000

Charles E. Johnson

125,000



Mark C. Pigott



228,000

Chutta Ratnathicam





Laura Stein



206,750

Seth H. Waugh

__

150,750

Geoffrey Y. Yang

125,000

103,000

(4)

Mr. G. Johnson is
the Chairman of the Board and Chief Executive Officer of the Company and
does not receive compensation for his service as a director. See the
Summary Compensation Table in Executive Compensation
below.

(5)

During fiscal year
2016, Mr. R. H. Johnson, Jr. was an executive as well as a director of
Franklin Resources, Inc. and did not receive compensation for his service
as a director. See Certain Relationships and Related Transactions below
for information regarding his fiscal year 2016
compensation.

The following table contains information
regarding the beneficial ownership of our common stock as of December 1, 2016 by
the stockholders that our management knows to beneficially own more than five
percent of our outstanding common stock as of such date. The percentage of
ownership is calculated based on 567,477,811 outstanding shares of common stock
on December 1, 2016.

Except as otherwise noted, each beneficial
owner in the table had sole voting and investment power with respect to such
shares.

The number of
shares of Company common stock beneficially owned by each person is
determined under rules promulgated by the Securities and Exchange
Commission.

(3)

Includes 97,591,000
shares held in a trust for which Mr. C.B. Johnson is trustee with voting
and investment power, of which 6,000,000 shares are pledged as collateral
in connection with a line of credit. Also includes approximately 21,526
shares held in the 401(k) Plan, 4,059,651 shares held in an individual
retirement account (an IRA), 1,350,000 shares held by his spouse, and
817,800 shares held by a trust for which his spouse is the lifetime
beneficiary. Also includes an aggregate of 3,429,044 shares held by two
private charitable foundations for which he is a trustee with shared
voting and investment power (disclaims beneficial ownership of such
shares).

(4)

Includes
104,465,045 shares held in a trust for which Mr. R. H. Johnson, Jr. is
trustee with voting and investment power. Also includes approximately
22,457 shares held in the 401(k) Plan, 906,735 shares held in an IRA, and
10,116 shares held by his spouse (disclaims beneficial ownership of such
shares). Also includes 1,256,733 shares held by a private charitable
foundation for which he is a trustee (disclaims beneficial ownership of
such shares).

(5)

Pursuant to
information reported by the holder in a Schedule 13G amendment filed with
the SEC on February 11, 2016, reporting shares of the Company beneficially
owned as of December 31, 2015. The holder reported having sole dispositive
power for such shares, which includes 31,447,721 shares for which the
holder reported having sole voting power, with the aggregate number of
reported shares consisting of shares beneficially owned by the holder
and/or certain other non-reporting entities. The holder lists its
principal business address as 111 Huntington Avenue, Boston, MA
02199.

STOCK OWNERSHIP AND STOCK-BASED
HOLDINGS OF DIRECTORS AND EXECUTIVE
OFFICERS

The following table contains information
regarding the beneficial ownership of our common stock as of December 1, 2016
by:

●

each director;

●

each executive officer named in the
Summary Compensation Table below; and

●

all directorsand executive
officers of the Company as a group (including named executive
officers).

The percentage of ownership is calculated
based on 567,477,811 outstanding shares of common stock on December 1, 2016.
Except as otherwise noted, each beneficial owner in the table had sole voting
and investment power with respect to such shares.

Name of Beneficial Owner

SharesBeneficiallyOwned(1)

TotalCompanyStock-BasedHoldings(2)

Percent
ofSharesBeneficiallyOwned(3)

Directors:

Peter K. Barker

17,946

28,051

*

Mariann
Byerwalter



6,191

*

Charles E. Johnson(4)

5,501,753

5,501,753

*

Gregory E.
Johnson(5)

5,211,623

5,211,623

*

Rupert H. Johnson,
Jr.(6)

106,661,086

106,661,086

18.8%

Mark C. Pigott

2,874

30,064

*

Chutta Ratnathicam

14,856

30,457

*

Laura Stein

9,141

23,075

*

Seth H. Waugh

2,414

7,760

*

Geoffrey Y. Yang

15,453

29,473

*

Named Executive
Officers:

Vijay C.
Advani(7)

439,301

439,301

*

Jennifer M. Johnson(8)

4,508,693

4,508,693

*

Kenneth A.
Lewis(9)

164,936

164,936

*

Craig S. Tyle(10)

126,327

126,327

*

All directors and executive
officersas a group (14 persons)(11)

122,676,402

122,768,789

21.6%

*

Represents less than
1% of the outstanding common stock.

(1)

The number of shares
of Company common stock beneficially owned by each person is determined
under rules promulgated by the Securities and Exchange Commission. Under
these rules, a person is deemed to have beneficial ownership of any
shares over which that person has or shares voting or investment power,
plus any shares that the person may acquire within 60 days, including
through the exercise of stock options or vesting of restricted stock units
where applicable. This number of shares beneficially owned therefore
includes all unvested restricted stock awarded and shares held by such
persons in the 401(k) Plan. Each share of unvested restricted stock
confers voting but not dispositive power. The Company has no outstanding
stock options, and such persons do not hold any restricted stock units
that may be acquired within 60 days.

(2)

This column combines
beneficial ownership of shares of our common stock with deferred director
fees held by certain non-employee directors in an account economically
equivalent to our common stock (but payable in cash), as of December 1,
2016. See Director FeesDeferred Director Fees for a description of
deferred director fees. This column indicates the alignment of the named
persons and group with the interests of the Companys stockholders because
the value of their total holdings will increase or decrease
correspondingly with the price of the Companys common stock. The amounts
described in this footnote are not included in the calculation of the
percentages contained in the Percent of Shares Beneficially Owned column
of this table.

STOCK OWNERSHIP AND STOCK-BASED HOLDINGS OF DIRECTORS AND
EXECUTIVE OFFICERS

(3)

The percent
ownership for each stockholder on December 1, 2016 is calculated by
dividing (i) the total number of shares beneficially owned by the
stockholder by (ii) 567,477,811 shares (the total number of shares
outstanding on December 1, 2016) plus any shares acquirable by that person
currently or within 60 days after December 1, 2016.

(4)

Includes an
aggregate of 1,999,800 shares held pursuant to a limited partnership, and
56,376 shares held in his childrens trusts for which Mr. C. E. Johnson is
a trustee with voting and investment power (disclaims beneficial ownership
of such shares). Also includes an aggregate of 3,429,044 shares held by
two private charitable foundations for which he is a trustee with shared
voting and investment power (disclaims beneficial ownership of such
shares).

(5)

Mr. G. Johnson is
also a named executive officer of the Company. Includes approximately
4,946 shares held in the 401(k) Plan and 225,161 shares of unvested
restricted stock. Also includes an aggregate of 2,961,000 shares held
pursuant to two limited partnerships, 8,100 shares held in a business
trust for Mr. G. Johnson, 67,708 shares held in his childrens trusts for
which Mr. G. Johnson is a trustee with voting and investment power
(disclaims beneficial ownership of such shares), and 17,307 shares held by
his spouse (disclaims beneficial ownership of such
shares).

Includes
approximately 1,110 shares held in the 401(k) Plan and 90,748 shares of
unvested restricted stock. Also includes 342,520 shares held in trusts for
which Mr. Advani and his spouse are co-trustees with shared voting and
investment power.

(8)

Includes
approximately 1,702 shares held in the 401(k) Plan and 71,992 shares of
unvested restricted stock. Also includes an aggregate of 2,808,000 shares
held pursuant to two limited partnerships, 15,000 shares held in a
business trust for Ms. Johnson, and 161,179 shares held in her childrens
trusts for which Ms. Johnson is a trustee with voting and investment power
(disclaims beneficial ownership of such shares). Also includes 245,696
shares pledged as collateral in connection with a line of credit (such
shares were not received as compensation).

(9)

Includes
approximately 1,866 shares held in the 401(k) Plan and 39,911 shares of
unvested restricted stock. Also includes 17,678 shares held in a trust for
which Mr. Lewis and his spouse are co-trustees with shared voting and
investment power.

(10)

Includes 24,643
shares of unvested restricted stock.

(11)

Includes an
aggregate of approximately 32,080 shares held in the 401(k) Plan and
452,455 shares of unvested restricted
stock.

This Compensation Discussion and Analysis
(CD&A) provides an overview and analysis of the Compensation Committees
philosophy and objectives in designing compensation programs for the Companys
executive officers. In this CD&A, we address the compensation determinations
and the rationale for those determinations relating to the Companys
chief executive officer, chief financial officer,
and the next three most highly compensated executive officers, whom we refer to
collectively as the named executive officers or NEOs. For the fiscal year
ended September 30, 2016, our NEOs were:

Name

Title

Gregory E. Johnson

Chairman of the Board and Chief Executive
Officer

Vijay C. Advani*

Co-President

Jennifer M. Johnson**

Co-President

Kenneth A. Lewis

Executive Vice President and Chief Financial
Officer

Craig S. Tyle

Executive Vice President and General
Counsel

*

Effective as of December 31,
2016, Mr. Advani resigned as an officer of the Company and his employment
with the Company terminated on December 30, 2016.

**

Ms. Johnson became President
of the Company upon Mr. Advanis termination, effective December 30,
2016.

The Compensation Committee believes that
executive compensation should be aligned with and support our performance and
business objectives. The Compensation Committee aims to focus the NEOs on our
long-term performance by using awards that generally vest over three years as
the Compensation Committee believes they are the most effective tools for
aligning the executives interests with long-term stockholder interests. The
portion of our NEOs annual compensation linked to short-term performance is
intended to motivate and reward executives to achieve certain objectives and to
allow us to attract and retain talented executives.

FISCAL YEAR 2016 BUSINESS
HIGHLIGHTSThe 2016 fiscal year was a
challenging one for the Company as it saw declines in assets under management,
investment performance, and stock price. Operating income, net new flows and
diluted earnings per share were also down and 3-year total shareholder return
ranking was in the lowest quartile of our peer group. The Compensation Committee
evaluated the decline in 2016 performance consistent with its philosophy that
executive compensation should reflect the Companys performance. In light of
this, the Committee reduced total compensation awarded for the CEO by 21%, and
total compensation awarded for all named executive officers was reduced by an
average of 10%. Total compensation awarded means the total compensation
awarded to NEOs based on performance for fiscal year 2016 and not the amount
reported in the Summary Compensation Table herein. The CEO and other NEOs also
experienced forfeitures of certain previously granted performance awards, as
further described under the heading Long-term Compensation.

The chart below compares the results of
our key performance measures for the current fiscal year against last fiscal
year:

Percentage

Key Performance Measures (as of and for fiscal years
ended September 30)

No minimum payout level is
guaranteed for bonuses or performance awards

✗

No employment, severance or change
in control agreements for NEOs

✗

No tax gross-ups

✗

No repricing of underwater stock
options

✗

No hedging

✗

No special retirement arrangements
for executives

STOCKHOLDER ENGAGEMENT AND SAY-ON-PAY
VOTESIn fiscal year 2016, we began our
formal stockholder engagement program to create the foundation for sustained,
long-term stockholder engagement. We value our stockholders interest and
feedback, and we are committed to maintaining an active dialogue to ensure that
we understand the priorities and concerns of our stockholders with respect to
best practices for governance matters and executive compensation. Our
independent Lead Director, Peter Barker, invited unaffiliated stockholders
representing 25% of the Companys outstanding shares, to meet. In September and
October of 2016, Mr. Barker conducted telephonic meetings with stockholders
representing approximately 10% of the Companys outstanding shares to discuss
our executive compensation program. These stockholders expressed support for our
executive compensation program, concurred with the Compensation Committees use
of discretion in determining bonus amounts due to the nature of our business,
and did not suggest making any changes.

At our 2014 Annual Meeting, our
stockholders had the opportunity to cast a non-binding advisory vote on the
compensation of our NEOs. More than 98% of the shares voted at the meeting
approved the NEOs compensation. The Compensation Committee welcomed this
feedback and intends to continue its practice of linking executive compensation
with Company performance. Proposal 2 gives our stockholders the opportunity to
vote on executive compensation at our 2017 Annual Meeting.

At our 2011 Annual Meeting, an advisory
vote was taken on the frequency with which we ask our stockholders to provide an
advisory vote on our executive compensation program in the future. We proposed
that the vote would be held every three years. A majority of the shares that
voted on this proposal approved a three year period for say-on-pay votes.
Proposal 3 gives our stockholders the opportunity to vote on the frequency of
obtaining an advisory vote on our executive compensation program at our 2017
Annual Meeting. We are again proposing that the vote be held every three
years.

Executive Compensation Overview

OBJECTIVES OF THE COMPENSATION
PROGRAMEach element of compensation paid
to our NEOs is designed to support one or more of the Company-wide or business
unit performance objectives described below.

Company-Wide
ObjectivesIn order to link executive
compensation to our performance, the Compensation Committee considers a number
of financial and non-financial objectives it believes further the growth and
welfare of the Company.

The Compensation Committee has placed
an emphasis on the following metrics:

Business Unit
ObjectivesThe Company-wide performance
measures are driven by and reflect the combined performance of our numerous
individual business units. However, the Compensation Committee recognizes that
such Company-wide measures may not fully reflect the individual performance and
contributions made by our separate business units and their respective leaders.
The Compensation Committee therefore believes that individual objectives should
also be set for the executives that are linked to the growth and development of
their respective business units. Such goals are specifically tailored to each
business unit and include, but are not limited to, a mix of investment
performance, sales, financial, customer service, technology and human resources
objectives. The Compensation Committee seeks to reward executives who achieve
such objectives as they are designed to improve business unit performance and
contribute to the performance of the Company as a whole.

COMPENSATION
PHILOSOPHYThe Compensation Committee
believes that executive compensation should be linked with our performance and
significantly aligned with the interests of our stockholders. In addition,
executive compensation is designed to allow us to recruit, retain and motivate
employees who play a significant role in our current and future
success.

The compensation of the NEOs should be
understood within the context of our business. We are an investment management
organization focused on long-term performance. One of the Compensation
Committees main goals is to focus the executives on our long-term performance.
The Compensation Committee believes that long-term awards are effective tools
for aligning the executives interests with long-term stockholder interests in
order to increase overall stockholder value. In addition, the NEOs implement
long-term initiatives for the Company that, by definition, take more than one
fiscal year to accomplish. Stability and continuity among the NEOs aids in our
implementation of such long-term initiatives. Average Company tenure for our
NEOs as of September 30, 2016 was 23.8 years. In setting the vesting targets for
long-term awards for our NEOs, the Compensation Committee uses performance
criteria that they believe are challenging but also achievable. In addition, in
order to further align the NEOs interests with our stockholders, each NEO is
expected to comply with our stock ownership guidelines. In recent years, equity
awards to our NEOs have been granted in the form of restricted stock and
restricted stock units rather than options, in part, because the Compensation
Committee believes that in the current market restricted stock is a better
motivational tool than options. However, the Compensation Committee may, in its
discretion, award stock options to executives in the future. Long-term awards
vest over a three-year period based on the achievement of predetermined Company
financial performance goals. In the event a performance measure is not achieved
at or above a specified threshold level, the portion of an award tied to such
performance measure is forfeited.

The portion of the NEOs annual
compensation linked to our short-term success is designed to motivate and reward
executives to achieve certain short-term objectives and to attract and retain
talented executives. In determining the amount of annual awards, the
Compensation Committee does not use a rigid formula based on a single metric or
a combination of metrics as the Compensation Committee believes that this would
be inadequate to evaluate overall performance. The Compensation Committee uses
the profitability of the firm as the starting point to establish the maximum
award pool under our Annual Incentive Compensation Plan (AIP) for all plan
recipients. Awards to the NEOs are made pursuant to our 2014 Key Executive
Incentive Compensation Plan (KEIP), which is a sub-plan of the AIP and awards
thereunder are intended to qualify for a tax deduction under Section 162(m) of
the Code. The Compensation Committee then establishes the maximum portion of the
KEIP pool that may be awarded to each NEO. In determining the actual amount
awarded to each NEO, the Compensation Committee uses discretion to adjust the
award downward and may use any one or more of the Company-wide objectives and
weightings for each NEO as described below. The award is made in cash and
restricted stock subject to time-based vesting. The actual objectives for each
NEO used for compensation determinations for the 2016 fiscal year are set forth
under Individual Performance Measures below.

The Compensation Committee believes that
the use of a strict formula based program for annual awards could have
inadvertent consequences such as encouraging the NEOs to focus on the
achievement of one specific metric to the detriment of others metrics. In
addition, tying compensation to a strict formula would not allow for adjustments
based on issues beyond the control of the NEOs. The Compensation Committee
recognizes that each NEO other than the CEO (each, a Senior Executive) may be
most able to directly influence the business unit for which he or she is
responsible and therefore believes it is appropriate to use negative discretion
to adjust annual awards for each such Senior Executive to take into account the
achievement of objectives that are directly tied to the growth and development
of their respective business unit. Furthermore, with respect to our overall
executive compensation program, the use of discretion provides the Compensation
Committee with the flexibility to compensate our NEOs for truly exceptional
performance without paying more than is necessary to incent and retain them
while maximizing available tax deductions for performance-based
compensation.

Execution of Our Philosophy

ROLE OF THE COMPENSATION COMMITTEE AND
THE DECISION MAKING PROCESSCompensation
decisions for our NEOs are made by the Compensation Committee with input from
its independent compensation consultant, other senior members of management, and
our CEO.

As our highest ranking officer, the CEO is
responsible for overseeing all of our operations and results, implementing our
strategic objectives and providing direction and leadership to the Company. The
Compensation Committee therefore believes that the CEOs compensation should
normally be higher than the compensation paid to the Senior Executives and that
a large percentage of such compensation should be at risk and linked to the
achievement of objectives based upon our performance with regard to certain
significant financial metrics.

While the Compensation Committee believes
that our financial performance should be the main driver of CEO pay, it also
believes the CEOs individual performance with regard to relevant non-financial
objectives and achievements during the year should be taken into account.
Historically, such non-financial objectives for the CEO have included customer
service, technology and human resource objectives, as well as goals regarding
our compliance with laws and regulations and the maintenance of excellence in
its corporate governance practices, among other things.

In setting the CEOs compensation, every
year the Compensation Committee reviews (i) our performance (both financial and
non-financial), (ii) compensation reports (which we refer to as tally sheets)
regarding the amounts paid to the CEO in prior years as salary,
bonusand
other compensation (including a sensitivity analysis regarding the CEOs vested
and unvested equity awards), (iii) relevant compensation benchmarks and
practices at peer companies, and (iv) relevant non-financial information, such
as data regarding achievements in the areas noted above. Based upon these
reviews, the Compensation Committee determines the CEOs incentive compensation
for the current fiscal year.

With respect to our Senior Executives, we
conduct an annual review process in which goals are developed for each business
unit by the CEO, the Senior Executive who leads the business unit and our
corporate planning group. Each units goals are specifically tailored because
their different business functions are not always easily comparable. The goals
for each Senior Executive for fiscal year 2016 are set forth under Individual
Performance Measures below.

The Compensation Committee then reviews
and discusses the evaluations, competitive compensation information, tally
sheets and the compensation recommendations for each such Senior Executive that
is provided to them by the CEO and our Human Resources Group as described in
Role of Management below. Based upon this review, the Compensation Committee
assesses the reasonableness of the compensation recommendations and sets each
Senior Executives incentive compensation.

●Review of fiscal year performance, including achievement
of company-wide priorities and key performance targets

●Evaluate fiscal year-to-date performance versus
peers

●Compensation Committee determination of the percentage
of pre-bonus operating income that will go into the award pool, with
recommendation developed by HR and reviewed and endorsed by the CEO prior
to Compensation Committee review

●Review of executive officer performance, with input from
independent compensation consultant and CEO (for other NEOs)

●Finalize award amounts

Third
Quarter

●Complete review of prior year peer compensation and
financial results provided by McLagan

●Senior members of the Human Resources Group meet with
the CEO to discuss competitive compensation, retention, funding
requirements and other significant compensation issues

ROLE OF MANAGEMENTThe Compensation Committee works with members of management,
including our CEO, to seek input regarding our executive compensation program.
Twice a year the CEO, aided by our corporate planning group, evaluates each
Senior Executive and his or her respective business units progress in achieving
its goals. In addition, the CEO works with senior members of our Human Resources
Group to recommend the appropriate award amount for each Senior Executive based
upon such performance. As part of this process, the Human Resources Group
conducts and reviews an analysis of competitive compensation by peer companies
(listed below under Peer Group Companies), compares previous year over year
performance and compensation paid to the executive, considers internal pay
equity issues and reviews third party executive compensation surveys related
generally to the financial services industry and specifically to the asset
management industry. In addition, the Human Resources Group prepares tally
sheets which include cash, equity and other compensation paid to each Senior
Executive in prior periods as well as an analysis of the total projected wealth
accumulation for such executive over the next five years. Upon completion of
this review process, management presents the performance evaluations to the
Compensation Committee and the CEO makes a recommendation regarding the
appropriate level of incentive compensation in relation to the objectives
achieved.

The Companys management has engaged
McLagan Partners (McLagan), a financial services industry compensation
consultancy to provide information on peer company compensation and pay trends.
McLagans proprietary surveys and market data are used to analyze the
competitiveness of the Companys executive compensation program and to
understand compensation forecasts and trends in the industry. The annual market
data assessment of peer executive officers is created with McLagans guidance
and provided to the Compensation Committee.

In addition, the Compensation Committee
considers the recommendation of our Human Resources Group as to the appropriate
size of the award pool. In preparing its recommendation, senior members of our
Human Resources Group meet periodically with our CEO to discuss competitive
compensation, retention, funding requirements and other significant compensation
issues. In addition, the CEO meets with the Chief Financial Officer (the CFO)
to review the quarterly financial performance of the Company over the most
recent quarters and the last two years, and in particular focuses on the
Companys year-over-year results with regard to the Company-wide performance
measures set forth under the heading Company-wide Objectives above. The
recommendation is reviewed and endorsed by the CEO prior to its presentation to
the Compensation Committee.

PEER GROUP
COMPANIESThe Companys Human Resources
Group, in conjunction with McLagan, compares the NEOs compensation to the
compensation of executive officers performing similar functions among a peer
group of other investment management companies. This comparison takes into
account our performance relative to the other companies, the executives
comparative roles, responsibilities for the performance of such companies, and
the market size and composition data for such peer companies. The Human
Resources Group also reviews compensation data from a survey of management and
administration positions in investment management organizations published by
McLagan. McLagan is engaged by the Company to provide additional peer
compensation information because of the complexity of identifying a reasonable
and appropriate competitor group, particularly given the differences in size and
business mix between us and certain of our publicly traded peer group companies.
The peer group companies reviewed this year were the same as the last six years
and included:

●

Affiliated Managers Group
Inc.

●

AllianceBernstein
L.P.

●

BlackRock, Inc.

●

BNY Mellon Asset Management

●

Eaton Vance Corp.

●

Federated Investors Inc.

●

Invesco Ltd.

●

Janus Capital Group

●

JP Morgan Asset Management

●

Legg Mason Inc.

●

MFS Investment Management

●

Oppenheimer Funds, Inc.

●

PIMCO Advisers,
L.P.

●

T. Rowe Price
Group

The Compensation Committee reviews such
public and privately held companies compensation for comparison purposes but
this review is only one of many factors that are considered by the Compensation
Committee in setting compensation. Our fiscal year ends on September 30th, and
that of all but one of the peer group companies ends on December 31st;
accordingly, any meaningful compensation comparison must rely on available data
covering time periods which do not correspond exactly and during which more
beneficial or more adverse economic conditions affecting compensation may have
prevailed. The Compensation Committee used 2015 peer market data received from
McLagan to compare NEO total compensation (comprised of base pay, bonuses and
equity compensation) against similar positions at the peer group companies. The
Compensation Committees decision on the level of compensation awarded reflected
our performance for fiscal year 2016 versus our peer group companies, as well as
consideration of our strong operating margin and expense containment among other
items. Although relative ranking information is considered by the Compensation
Committee in evaluating compensation for our NEOs, the Compensation Committee
does not target a specific percentile ranking for any component of, or the
aggregate total of, NEO compensation.

ROLE OF COMPENSATION
CONSULTANTThe Compensation Committee has
the sole authority to retain and terminate any compensation consulting firm
directly assisting it in the evaluation of director or executive compensation.
The Compensation Committee also has the sole authority to approve fees and other
retention terms for its consultant.

The Compensation Committee has directly
retained Exequity LLP (Exequity) as its compensation consultant to provide
objective analyses of, and counsel on, our executive compensation program and
practices. Exequitys role is set by the Compensation Committee and, in general,
is used to review and comment objectively on management proposals and
presentations to the Compensation Committee throughout the year covering all
elements of compensation paid to the NEOs. Exequity also provides counsel on
general market trends and technical developments, and input on the size and
structure of pay for the non-employee directors of the Board. Under the terms of
this engagement, Exequity is required to obtain the prior written approval of
the Compensation Committee before Exequity or its affiliates performs any
non-executive compensation related services to the Company or its subsidiaries.
Exequity is required to report to the Compensation Committee any such services
and fees annually and upon the reasonable request of the Compensation Committee.
There were no such services during fiscal year 2016.

The Compensation Committee recognizes that
it is essential to receive objective advice from compensation consultants. The
Compensation Committee selects its compensation consultant only after taking
into consideration all factors relevant to the consultants independence
including the following:

●

Provision of other services to the
Company by the consultants firm;

●

Aggregate fees paid by the Company
and fees as a percentage of the total revenue of the consultants firm;

●

Policies and procedures of the
consultants firm designed to prevent conflicts of
interest;

●

Any business or personal
relationships between the consultant, the consultants firm and any
Compensation Committee member or executive officer of the Company; and

●

Whether the consultant holds shares
of the Companys stock;

During fiscal year 2016, the Company paid
Exequity $63,000 in consulting fees directly related to services performed for
the Compensation Committee.

Components of Compensation Program and
Fiscal 2016 Compensation

The compensation program for the NEOs
consists primarily of a base salary and incentive compensation comprised of a
combination of cash and equity, based upon the achievement of business unit and
Company-wide objectives as described below.

Each element of compensation is designed
to reward the achievement of different objectives as summarized
below:

COMPENSATION
ELEMENT

DESIGNED TO
REWARD

RELATIONSHIP TO THE
OBJECTIVES

BASE
SALARY

●Experience, knowledge of the industry, duties and scope
of responsibility

●Provides a minimum, fixed level of cash compensation to
attract and retain talented executives to the Company who can continue to
improve the Companys overall performance

SHORT-TERM
INCENTIVECOMPENSATION (KEIPCASH AWARDS)

●Success in achieving annual objectives

●Motivates executives to achieve specific Company-wide
and business unit objectives

2016 CEO AND OTHER NAMED EXECUTIVE
OFFICER PAY MIXThe following charts show
the various components of the compensation of our CEO and Senior Executives.
They illustrate the Compensation Committees emphasis on equity-based and
performance-based components of our executive compensation program.

COMPENSATION MIXCEO and Average Senior Executive Pay

Base SalaryThe Compensation Committee believes that base salaries for the
NEOs should be limited to a reasonable base compensation for the day-to-day
performance of their job responsibilities, and that the majority of their pay
should be in variable compensation tied to performance. Base salaries are
evaluated by the Compensation Committee annually for all NEOs and in general
remain static unless the individual is promoted or the Compensation Committee
determines that an adjustment is necessary due to compensation or economic
trends in the industry.

In fiscal year 2016, Mr. Advani and Ms.
Johnson each received a $75,000 base salary increase in connection with their
respective promotions to the title of Co-President of the Company such that
their annual base salary went from $525,000 to $600,000.

Incentive
CompensationThe Compensation Committee
believes that NEOs should enhance our performance by linking a significant
portion of their compensation to the achievement of business unit, Company-wide
and individual objectives. NEO compensation is awarded under our KEIP, with the
amount of such compensation determined based on performance for the most
recently completed fiscal year and made in the form of cash and equity, with the
equity portion granted under our 2002 Universal Stock Incentive Plan (USIP)
and subject to vesting based on the passage of time. Additional long-term
compensation is awarded to our NEOs in the form of equity also granted under our
USIP and is subject to performance vesting conditions.

INDIVIDUAL PERFORMANCE
MEASURESThe performance objectives set
for and subsequently achieved by our NEOs in determining fiscal year 2016
incentive compensation are set forth below:

For our CEO, Greg Johnson, the objectives
for the KEIP award were weighted as follows:

Under Mr. Johnsons leadership,
long-term investment performance remained solid, with 75% of assets ranked
in the top two quartiles relative to the peer group for the 10-year
period; 50%, 32%, and 66% of assets ranked in the top two quartiles based
on the one, three-, and five-year periods respectively.*

Financial Results (30%)Under
Mr. Johnsons leadership:

●

The Company was able to achieve an
operating margin of 35.7% on operating income of approximately $2.4
billion, highlighting the Companys fiscal discipline and focus on expense
management.

●

While performance challenges in
several flagship strategies resulted in net new flows of ($86.5) billion,
long-term gross sales of $101.7 billion during fiscal year 2016 continued
to reflect the diversified mix of our assets under management by
investment strategy, client type, and geographic region. Franklin
Templeton was seventh in gross sales ranking in U.S. retail mutual funds
for the total industry for fiscal year 2016, out of 83 competitors.**

Strategic Initiatives
(20%)

●

Mr. Johnson successfully developed
senior talent, including guiding the Co-Presidents in their new roles and
launching the CEO Executive Committee. This Committee, which has benefited
from the inclusion of key chief investment officers (CIOs), shapes our
overall strategy and makes operational decisions, including defining
strategic initiatives and managing the investment product
lineup.

●

The CEO Executive Committee
identified ways to reduce expenses by $55 million in fiscal year 2017 by
restructuring select business units, carefully managing costs and
implementing a voluntary separation plan in fiscal year 2016.

●

Under Mr. Johnsons guidance, the
CEO Executive Committee made significant progress on other strategic
initiatives for fiscal year 2016,
including:

●

Further enhancing the investment
risk management framework and guidelines for monitoring our largest
funds.

●

Focusing on sector research
collaboration through an initiative under the new Equity CIO role to
enhance information sharing across investment teams.

●

Focusing on leveraging the Global
Macro teams research and insights across the Company to engage investment
management groups in dialogue covering various economic
topics.

●

Continuing momentum in our strategic
response to the changing U.S. retail distribution
landscape.

Preparing for the implementation of
the Department of Labors fiduciary rule (effective April 2017), which
governs retirement advice by working with distribution partners to develop
products and services consistent with the rule to ensure the needs of our
intermediaries are met.

●

Continuing to engage in discussions,
through industry groups, with policymakers in the U.S. and globally to
advocate for thoughtful industry regulations.

●

Mr. Johnson continued as a member of
the Board of Governors for the Investment Company Institute, the national
association of US investment companies, as well as actively participating
with ICI Global.

*

Sources: Based on data from various sources, including
Lipper, Morningstar, eVestment, and internal sources as of
9/30/2016.

**

Sources: Simfund MF, Investment Company Institute and
internal sources as of 9/30/2016.

Co-President, jointly
oversees Investment Management, Solutions & Alternatives, and all
related investment management support services, including trading and risk
management. He is also responsible for the Companys global retail and
institutional distribution strategies and initiatives, including sales,
marketing, client service and product
development.

●Mr. Advani led the initiative to address the changing
retail distribution landscape. For example, he implemented enhanced
contact management technology to improve advisor engagement and retention.
He also formed the Private Wealth Division in the U.S. to allow the
Company to be more competitive in the growing registered investment
advisor, bank trust and private bank market segment and address the unique
needs of this segment.

●In partnership with Ms. Johnson, Mr.
Advani:

●Hired the lead for our LibertyShares ETF business and
created a dedicated ETF team, as well as an ETF board of
directors.

●Successfully launched four strategic beta ETFs in the
U.S. and additional active ETFs to the LibertyShares suite of
funds.

●The Co-Presidents also partnered on a number of
strategic initiatives designed to drive the delivery of strong, long-term
investment performance, including:

●Implementing the initiative to enhance the investment
risk management framework and guidelines for monitoring our 25 largest
funds.

●Focusing on increased investment team information
sharing and heightening overall awareness of cross-team research
capabilities, an initiative under the new Equity CIO role, to enhance this
competitive advantage for the Company.

●Leveraging the Global Macro teams research across the
Company to further engage investment management groups in dialogue
covering macro-economic growth and currencies topics.

●As part of the focus on the Solutions and Alternatives
business, Mr. Advani launched NextStep funds, a suite of funds designed
and managed by the Franklin Templeton Solutions group to meet emerging
affluent investor needs identified by a major global distributor. He also
launched the Franklin K2 Long Short Credit Fund and the Franklin K2 Global
Macro Opportunities Fund in the U.S.

●Mr. Advani identified opportunities to leverage digital
strategies across distribution, including large technology projects to
improve the digital and operations ecosystems in India.

●Mr. Advani refined the next level senior leadership
teams within the U.S. and international distribution businesses, including
the addition of a retail and institutional channel focus in the
international business, and further aligned the Global Financial
Institutions Group with U.S. Advisory Services and International Advisory
Services.

Co-President, jointly
oversees investment management and all related investment management
support services, including trading and risk management. In addition, she
is responsible for Global Transfer Agency operations, Investment
Management Services, Global HR and Compensation and Fiduciary Trust
Company International. She also has global responsibilities for software
development and infrastructure/systems
support.

●Ms. Johnson led an initiative to align the Companys
emerging markets equities teams under one organizational structure by
naming a new chief investment officer of Templeton Emerging Markets Group
(TEM) and taking steps to increase formal collaboration across the TEM and
Local Asset Management investment groups to strengthen
performance.

●Under Ms. Johnsons leadership, the technology teams
made significant enhancements and upgrades to support the business,
including the launch of a multi-year fund accounting system initiative to
support our core products, the development of specialized systems for the
ETF launch, and the implementation of tools to reduce time to market and
increase automated content generation for distribution. Technology teams
also supported our High Net Worth business with a redesigned web presence
and needed business functionality.

●Ms. Johnson provided strategic guidance in the areas of
talent development, succession planning and overall retention in support
of investment management, which resulted in the execution of various
changes across investment teams to further strengthen the organizational
structure and succession planning. She also oversaw programs to drive
employee engagement, including technology enhancements focused on internal
collaboration for our global workforce to increase
productivity.

●In partnership with Mr. Advani, Ms.
Johnson:

●Hired the lead for the Companys LibertyShares ETF
business and created a dedicated ETF team and ETF board of
directors.

●Successfully launched four strategic beta ETFs in the
U.S. and additional active ETFs to the LibertyShares suite of
funds.

●The Co-Presidents also partnered on a number of
strategic initiatives focused on the delivery of strong, long-term
investment performance, including:

●Implementing the initiative to enhance the investment
risk management framework and guidelines for monitoring our 25 largest
funds.

●Focusing on increased investment team information
sharing and heightening overall awareness of cross-team research
capabilities, an initiative under the new Equity CIO role, to enhance this
competitive advantage for the Company.

●Leveraging the Global Macro teams research across the
Company to engage investment management groups in dialogue covering
macro-economic growth and currencies topics.

●Ms. Johnson hired a new chief executive officer of our
High Net Worth division and completed a major rebranding initiative,
including new brand architecture.

●While achieving cost reduction objectives, Mr. Lewis
continued to guide the efficient use of financial resources by balancing
the support for mature business lines with the funding requirements of new
business opportunities.

●Mr. Lewis led efforts to enhance shareholder value
through share repurchases and cash dividends to stockholders, returning
over 100% of net income to stockholders.

●Mr. Lewis efficiently executed the Companys global real
estate strategy by optimizing the Companys mix of owned and leased real
estate, including the negotiation of new leases and construction
development in several key locations.

Craig S.
Tyle

Executive Vice President and
General Counsel, responsible for both Legal and Global
Compliance.

Under Mr. Tyles
leadership:

●The Legal Department provided support in connection with
the launch of several new products, including the Franklin Liberty Shares
ETFs and the Franklin NextStep multi-asset funds (both inside and outside
the United States). The Legal Department also secured approval for the
launch of the Franklin K2 Alternative Strategies Fund in Singapore, which
represented the first ever retail approval of a hedged fund in that
jurisdiction, and an exemptive order permitting the distribution of
Franklins Luxembourg-domiciled funds to institutional investors in
Canada.

●The Legal and Global Compliance Departments revised the
regulatory licenses of Company affiliates in the U.K. and Italy, which
resulted in a simplified structure and reduced costs in the European Union
(EU).

●The Legal and Global Compliance Departments provided
ongoing advice to the Companys business units on numerous new and pending
regulatory changes, including the adoption of an expanded fiduciary
standard by the U.S. Department of Labor, SEC rule proposals relating to
liquidity management and the use of derivatives by U.S.-registered funds,
several new EU regulations and the potential implications of
Brexit.

●The Legal Department led and coordinated the Companys
active participation, both directly and through industry associations, in
commenting on numerous regulatory proposals in the U.S., the EU, Canada,
and other jurisdictions.

●The Global Compliance Department introduced or adopted
several new and revised compliance policies and procedures, including a
new compliance policy (and related procedures) on payments to fund
intermediaries.

The size of the AIP award pool is set by
the Compensation Committee as a percentage (not to exceed 20%) of our pre-bonus
net operating income, exclusive of passive income and calculated before
non-operating interest, taxes, extraordinary items, and any special items (such
as special compensation payouts on account of a merger). The final amount of
pre-bonus net operating income or PBOI that goes into the award pool is
approved by the Compensation Committee after consultation with certain members
of management (as described above). For NEOs, such awards are made under our
KEIP. Pursuant to the KEIP, the amount of the pool available to fund awards for
the fiscal year is equal to 1.25% of PBOI for such year. The maximum KEIP award
that may be paid to any participant for any performance period is equal to 40%
of the KEIP award pool. The KEIP awards are deducted from the AIP award
pool.

At the beginning of fiscal year 2016, the
Compensation Committee approved a maximum KEIP award amount for each NEO. The
maximum award that each NEO is eligible to receive, however, is not an
expectation of the actual bonus that will be paid to him or her, but a cap on
the range ($0 to the maximum amount) that an individual may be paid while
maintaining the tax deductibility of the bonus as performance-based compensation
for purposes of Section 162(m) of the Code. As described above in our
Compensation Philosophy, the Compensation Committee has historically exercised
negative discretion to pay significantly less than the maximum amount available
to the NEOs under the KEIP award pool based on the metrics and weightings
described herein.

Grants from the KEIP award pool consist of
a combination of a cash and restricted stock, with the cash portion being paid
following the end of our fiscal year to reward an executive for achievement of
shorter-term objectives based on the prior fiscal year. The equity portion is
also granted shortly following the end of the
fiscal year following the year for which the performance relates, with the
number of shares of restricted stock determined by dividing the dollar value of
the equity portion of the award by the closing price of our common stock on the
date of grant. The restricted stock grants are subject to deferred vesting over
time as described in more detail below. Awards are generally structured as
follows:

KEIP AWARD POOL
BREAKDOWN

Amounts ≤ $1.0
million

Amounts > $1.0 million and ≤ $7.0
million

Amounts > $7.0
million

In December 2015, the Compensation
Committee approved the participation in the KEIP for fiscal year
2016for
each of our NEOs and allocated a maximum award amount under the KEIP to each
such NEO as follows: 40% to Mr. G. Johnson, 21% for Mr. Advani, 21% for Ms.
Johnson, 10% for Mr. Lewis and 8% for Mr. Tyle.

In November 2016, based on the performance
and achievements described above for each of the NEOs, the Compensation
Committee approved awards under the KEIP with the following aggregate amounts:
$6.30 million to Mr. G. Johnson; $3.15 million to Mr. Advani; $3.15 million to
Ms. Johnson; $1.56 million to Mr. Lewis; and $1.08 million to Mr. Tyle. Such
awards were paid (or granted) in fiscal year 2017.

KEIP Bonus Award
Values

Maximum Payout Basedon
Total Pool

Actual Payout
Amounts

Name

(as dollar amount)

(as a
percentage)

FY2016(as dollar
amount)

FY2016(as a
percentage)

FY2015(as dollar
amount)

YoY Change(as a
percentage)

Gregory E. Johnson

$

13,522,285

40%

$

6,300,000

19%

$

9,000,000

(30%)

Vijay C. Advani

$

7,099,200

21%

$

3,150,000

9%

$

4,200,000

(25%)

Jennifer M. Johnson

$

7,099,200

21%

$

3,150,000

9%

$

2,800,000

(13%)

Kenneth A. Lewis

$

3,380,571

10%

$

1,560,000

5%

$

2,080,000

(25%)

Craig S. Tyle

$

2,704,457

8%

$

1,080,000

3%

*



*

Mr. Tyle did not
receive a KEIP award in fiscal year 2015.

Long-term CompensationGrants of equity are designed to reward an
executive for continued excellence and attainment of longer-term objectives. The
number of shares of restricted stock awarded under the KEIP during fiscal year 2016 is determined based on performance
for fiscal year 2015 as described above, but because these awards are subject to
deferred vesting, they help to focus an executive on further long-term growth

and development and aid in retention.
These awards are scheduled to vest over a three year period from the date of
grant subject to the executives continued employment.

In order to further emphasize the
importance of forward-looking long-term performance, the Compensation Committee
also awarded a portion of NEO compensation as performance-based restricted stock
unit awards. Similar to awards granted under the KEIP, performance-based
long-term incentive awards granted to the CEO and the three most highly
compensated executive officers (other than the CEO and the CFO), are intended to
qualify for a tax deduction under Section 162(m) of the Code. These awards vest
over a three-year period based on the achievement of predetermined Company
financial performance goals. In the event a performance measure is not achieved
at or above a specified threshold level, the portion of an award tied to such
performance measure is forfeited.

The performance-based equity awards
granted in fiscal year 2016 (the 2016 Performance Awards) are tied to the
achievement of (i) investment performance, defined as the average investment
performance for all assets under management (i.e., investment funds and separate
accounts) that are ranked by independent third
party rating agencies (Investment Performance); and (ii) shareholder return
ranking, defined as our total return to stockholders, as reported by Bloomberg
or FactSet Research Systems (or their respective successors), relative to the
respective total return to stockholders of certain peer companies (Shareholder
Return Ranking). For purposes of the 2016 Performance Awards, peer companies
included the following public investment management firms: Affiliated Managers
Group Inc., AllianceBernstein L.P., BlackRock, Inc., Eaton Vance Corp.,
Federated Investors Inc., Invesco Ltd., Janus Capital Group, Legg Mason Inc. and
T. Rowe Price Group.

For each of the NEOs, 50% of the value of
the 2016 Performance Awards is contingent on the achievement of Investment
Performance and 50% is contingent on the Companys Shareholder Return Ranking.
The 2016 Performance Awards vest at the end of the three-year period, subject in
each case to the achievement of the performance levels shown in the table below
and the NEOs continued employment through the date on which the Compensation
Committee certifies that the applicable performance measure has been
achieved.

FY2016 Performance
Awards(FY2018 Vesting)

Three Year Performance Period
Ending in FY2018

Performance
Level

%
Vesting

Investment
Performance(Assets under Management (AUM))

AUM
in Top 2 Quartiles≥75%

125%

AUM in Top 2 Quartiles≥70% -
<75%

100%

AUM in Top 2 Quartiles≥50% -
<70%

50%

AUM in Top 2 Quartiles<50%

0%

Shareholder Return
Ranking

Top Quartile

125%

2nd Quartile

100%

3rd Quartile

25%

4th Quartile

0%

Based on the performance and achievements
described above for each of the NEOs, the Compensation Committee approved the
2016 Performance Awards under the USIP for each of our NEOs with the following
grant date target award amounts: $3,000,000 for Mr. G. Johnson; $1,400,000 for
Mr. Advani; $1,400,000 for Ms. Johnson; and $600,000 for Mr. Lewis, in each
case, subject to the vesting criteria described above. Mr. Tyle did not receive
a 2016 Performance Award.

In previous years, awards granted to our
NEOs generally were 50% based on the achievement of operating margin, defined as
the operating profit margin, expressed as a percentage, that is reported as
operating margin in the annual financial statements included in the Companys
Annual Report on Form 10-K (Operating Margin), with the remaining 50% based on
the Companys Shareholder Return Ranking. With respect to the portion of such
past awards that were scheduled to vest in fiscal year 2016, our Operating
Margin for fiscal year 2016 was 35.7% and surpassed the

31% minimum threshold that was set forth
for the year. Accordingly, one-third of the portion of awards granted in fiscal
year2014
to all NEOs and in fiscal year 2015 to the Senior Executives, tied to the
achievement of Operating Margin, vestedin December 2016. In fiscal year 2015, the
equity award to our CEO was 100% based on Shareholder Return Ranking.

As of September 30, 2016, the Companys
three-year Shareholder Return Ranking was in the lowest quartile of the peer
group. Therefore, none of the performance-based restricted stock awards granted
in fiscal year 2014 and otherwise scheduled to vest on December 1, 2016 that
were tied to Shareholder Return Ranking (2014 SRR Shares) vested. Below is a
summary of amounts forfeited by NEOs who received 2014 SRR Shares:

Name

2014 SRR
SharesForfeited

2014 SRR SharesForfeited
GrantDate Value ($)

2014 SRR SharesForfeited
Value asof 9/30/16($)

Gregory E. Johnson

27,877

1,500,000

991,941

Vijay C. Advani

11,155

600,000

396,783

Jennifer M. Johnson

5,113

275,000

181,869

Kenneth A. Lewis

4,881

262,500

173,617

Total Compensation
AwardedThe Total Compensation Awarded table below
compares the annualized base pay and incentive compensation (total direct
compensation) awarded for performance in the specified fiscal year with the
total compensation reported in the Summary Compensation Table, which reflects
incentive compensation awarded in the specified fiscal year with respect to performance in the previous fiscal year. For
example, the CEOs total direct compensation awarded for performance in fiscal
year 2016 decreased by 21%, while the Summary Compensation Table shows a
decrease of 20%, because it reflects the incentive compensation awarded in
fiscal year 2016 for the CEOs performance in fiscal year 2015.

Total Compensation Paid FY2016
(in Thousands)1

Total Compensation
Awardedfor FY Performance

Reported in
SummaryCompensation Table

Name

FY2016

FY2015

YoY Change

FY2016

FY2015

YoY
Change

Gregory E. Johnson

$

10,086

$

12,783

(21%)

$

12,046

$

15,034

(20%)

Vijay C. Advani

$

5,754

$

6,127

(6%)

$

5,497

$

6,852

(20%)

Jennifer M. Johnson

$

5,754

$

4,727

22%

$

4,797

$

4,246

13%

Kenneth A. Lewis

$

2,389

$

3,207

(25%)

$

2,871

$

3,392

(15%)

Craig S. Tyle2

$

1,859





$

1,739





1

Excludes
the value of any executive perquisites and benefits.

2

Mr. Tyle was not a named
executive officer at the end of fiscal year
2015.

The 21% decrease in Mr. G. Johnsons cash
and incentive award compensation with respect to his performance in fiscal year
2016 comprised a 30% decrease in his incentive award under the KEIP from $9
million to $6.3 million. His base compensation and performance-based long-term
incentive award granted in November 2016 were the same as in the prior fiscal year. The actual amount of the performance-based
long-term incentive award that will be paid to Mr. G. Johnson for his
performance in fiscal year 2016 will depend on the portion that vests over the
next three years based on the performance metrics described above.

Benefits and Perquisites

As a general practice, we do not provide
material benefits and provide only limited perquisites to the NEOs that are not
provided to other employees. All executive officers are entitled to receive medical, life and disability insurance coverage and
other corporate benefits available to most of the Companys employees.

Our NEOs are employed on an at will
basis, without any written employment or severance agreements. Accordingly, our
NEOs are not entitled to any particular severance benefits upon termination of
employment by the Company. The Company may, however, provide severance on a
case-by-case basis as approved by the Compensation Committee in its discretion.

Similarly, we have not entered into any
agreement with any NEOs that provides for additional payments solely on account
of a change in control of the Company. Our only change in control provisions are
found in existing compensation plans and apply to all participants in those
plans.

Tax Considerations

In evaluating compensation program
alternatives, the Compensation Committee considers the potential impact on the
Company of Section 162(m) of the Code. Section 162(m) limits to $1 million the
amount that a publicly traded corporation, such as the Company, may deduct for
compensation paid in any year to its chief executive officer and certain other
named executive officers. However, compensation which qualifies as
performance-based is excluded from the $1 million per covered employee limit
if, among other requirements, the compensation is payable only upon attainment
of pre-established, objective performance goals under a plan approved by our
stockholders.

The Compensation Committee endeavors to
maximize deductibility of compensation under Section 162(m) to the extent
practicable while maintaining competitive compensation. The Compensation
Committee expects that its performance-based awards either in the form of cash,
restricted stock or performance shares should qualify for the performance-based
compensation exception to Section 162(m). The Compensation Committee, however,
believes that it is important for it to retain maximum flexibility in designing
compensation programs that are in the best interests of the Company and its stockholders. Therefore, the Compensation
Committee, while considering tax deductibility as a factor in determining
compensation, may not limit compensation to those levels or types of
compensation that will be deductible if it believes that the compensation is
commensurate with the performance of the covered employee.

We do not provide any executive officer,
including any NEO, with a gross-up or other reimbursement payment for any tax
liability that he or she might owe as a result of the application of Sections
280G, 4999, or 409A of the Code. Sections 280G and 4999 of the Code provide that
executive officers and directors who hold significant equity interests and
certain other service providers may be subject to an excise tax if they receive
payments or benefits in connection with a change in control that exceeds certain
prescribed limits, and that the company, or a successor, may forfeit a deduction
on the amounts subject to this additional tax. Section 409A also imposes
additional significant taxes on the individual in the event that an executive
officer, director or other service provider receives deferred compensation
that does not meet certain requirements of Section 409A of the Code.

Notwithstanding anything to the
contrary set forth in any of the Companys previous or future filings under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, that might incorporate filings made by us under those statutes, the
following report shall not be deemed to be soliciting material, or to be
incorporated by reference into any prior filings or future filings made by the
Company under those statutes.

Compensation Committee Report

The Compensation Committee has reviewed
and discussed with management the Compensation Discussion and Analysis included
in this Proxy Statement. Based on this review and discussion, the Compensation
Committee has recommended to the Board that the Compensation Discussion and
Analysis be included in this Proxy Statement and incorporated by reference into
our Annual Report on Form 10-K for the fiscal year ended September 30, 2016.

The following table below provides
compensation information for the Companys named executive officers for the
fiscal years ended September 30, 2016, 2015 and 2014.

Name andPrincipal
Position

Year

Salary($)

StockAwards($)(1)(2)

Non-EquityIncentive
PlanCompensation($)(3)

All
OtherCompensation($)

Total($)

Gregory E.

2016

786,133

7,960,000

3,300,000

55,184

(4)

12,101,317

Johnson

2015

783,633

10,600,000

3,650,000

63,707

15,097,340

Chairman of the

2014

780,132

11,350,000

3,650,000

124,164

15,904,296

Board and Chief

Executive Officer

Vijay C. Advani(5)

2016

604,039

3,168,000

1,725,000



5,497,039

Co-President

2015

527,356

4,075,000

2,250,000



6,852,356

2014

525,000

4,350,000

3,150,000

8,025,000

Jennifer M.

2016

604,039

2,468,000

1,725,000

11,544

(4)

4,808,583

Johnson

2015

527,356

2,168,750

1,550,000

16,782

4,262,888

Co-President

2014

525,000

2,000,000

1,900,000



4,425,000

Kenneth A. Lewis

2016

529,039

1,412,000

930,000



2,871,039

Executive Vice

2015

527,356

1,675,000

1,190,000



3,392,356

President and

2014

525,000

1,625,000

1,450,000



3,600,000

Chief Financial

Officer

Craig S. Tyle(6)

2016

478,654

570,000

690,000



1,738,654

Executive Vice

President and

General Counsel

(1)

Stock award values represent
the aggregate grant date fair value for all grants made during each fiscal
year in accordance with the requirements of ASC 718 in the specified year
for grants made in such year and prior years. For awards with performance
conditions, the value at the grant date reported is based on the probable
outcome of the performance conditions using a Monte Carlo valuation
method. Additional information is set forth in the Grants of Plan-Based
Awards (Fiscal Year 2016) table below. See Note 12Stock-Based
Compensation in the Companys Annual Report on Form 10-K for fiscal year
2016 filed with the Securities and Exchange Commission on November 14,
2016 for further details.

Compensation Awarded for Fiscal Year Performance

The table below is a supplemental
table.

Total Compensation Awarded
forFY Performance($)*

Gregory E.

2016

10,086,133

Johnson

2015

12,783,633

2014

15,780,132

Vijay C. Advani

2016

5,754,039

2015

6,127,356

2014

7,925,000

Jennifer M.

2016

5,754,039

Johnson

2015

4,727,356

2014

4,675,000

Kenneth A.

2016

2,389,039

Lewis

2015

3,207,356

2014

3,725,000

Craig S. Tyle

2016

1,858,654

*

To supplement the
disclosure required by the SEC, this table reflects compensation awarded
to the NEOs based on performance by the Company and the NEOs during the
listed fiscal years. It is not a substitute for the amounts reported under
the Total column in the SCT table immediately to the
left.

For fiscal year 2016, Total
Compensation Awarded for FY Performance represents: (1) Salary, plus (2)
Non-Equity Incentive Plan Compensation, plus (3) the aggregate grant date
fair value of equity awards granted in fiscal year 2017 based on fiscal
year 2016 performance. It does not include 2016 All Other
Compensation.

For prior fiscal years, the total
represents (1) Salary, plus (2) Non-Equity Incentive Plan Compensation,
plus (3) the aggregate grant date fair value of equity granted in the
subsequent fiscal year based on prior fiscal year performance without
regard to the probable outcome of any performance
conditions.

(2)

As of September 30, 2016, the
Companys three-year Shareholder Return Ranking was in the lowest quartile
of the peer group. Therefore, none of the performance-based restricted
stock awards granted in fiscal year 2014 and scheduled to vest on December
1, 2016 that were tied to Shareholder Return Ranking vested. Mr. Tyle did
not receive a grant of 2014 SRR Shares. Below is a summary of amounts
forfeited:

2014 SRR
Forfeitures

Name

Number ofShares
Forfeited

Grant Date Value
($)

Value as of 9/30/16
($)

Gregory E.
Johnson

27,887

1,500,000

991,941

Vijay C.
Advani

11,155

600,000

396,783

Jennifer M.
Johnson

5,113

275,000

181,869

Kenneth A.
Lewis

4,881

262,500

173,617

(3)

Represents the cash portion of
awards made under the Companys KEIP. See Compensation Discussion and
AnalysisThe Elements of Executive CompensationShort-term and Long-term
Incentive Compensation above for more details.

(4)

For Mr. G. Johnson and Ms.
Johnson, includes $37,524 and $7,374, respectively, for personal use of
the Companys aircraft in fiscal year 2016. The aggregate incremental cost
of personal use of Company aircraft is calculated using the rate per
nautical mile for each personal flight, published twice per year by
Conklin & de Decker Associates, Inc. for each type of Company
aircraft. Such amount is based on the published rate at the time of the
personal flight use. These rates are used by a variety of corporate
aviation operators for cost and budget estimation purposes. The rates
include the estimated variable costs of operating aircraft, including
fuel, labor and parts for most scheduled maintenance, engine, propeller
and auxiliary power unit overhaul cost and parts repair and replacement
costs, landing fees and expenses, supplies and catering and crew costs
excluding salaries, benefits and fixed costs. The rates do not include the
cost of periodic aircraft refurbishment, hangar costs, dues,
subscriptions, weather and navigation services or the cost of insurance
and administrative services. The rates also do not include depreciation or
any tax benefit reductions due to personal use. The aggregate incremental
costs in the table includes the cost of all nautical miles flown for
positioning flights necessary to accomplish a personal flight and to
return the aircraft to its next scheduled location. Mr. G. Johnsons
amount also includes fees paid or reimbursed by the Company for spousal
activities related to off-site meetings and tickets to sporting
events.

(5)

Mr. Advani terminated
employment with the Company effective December 30, 2016.

(6)

Mr. Tyle was not an NEO in
fiscal years 2015 or 2014.

Grants of Plan-Based Awards (Fiscal Year
2016)

The following table presents information
regarding grants of plan-based awards to the named executive officers during the
fiscal year ended September 30, 2016.

Represents the cash portion of the maximum awards that
may be made under the KEIP for fiscal year 2016 awards. Awards under the
KEIP have no assigned threshold or target amount, and are determined at
the discretion of the Compensation Committee, subject to a pre-determined
maximum. Accordingly, no threshold or target amounts are listed. Awards
granted in fiscal year 2016 for performance in fiscal year 2015 were
comprised of 65% cash and 35% restricted stock for amounts up to $1.0
million, 50% cash and 50% restricted stock for amounts in excess of $1.0
million, and 100% restricted stock for amounts in excess of $7.0 million.
Please reference the Compensation Discussion and Analysis for the actual
cash amount received by each named executive officer in fiscal year 2016
pursuant to such awards.

(2)

Determined pursuant to ASC 718, excluding the effect of
estimated forfeitures. For equity awards that are subject to market
conditions, the grant date fair market value reported is based upon the
probable outcome of such conditions using a Monte Carlo valuation method.
The grant-date fair value of the maximum amount under the USIP that could
be received assuming all performance criteria is met was $3,750,000 for G.
Johnson, $1,575,000 for V. Advani, $1,575,000 for J. Johnson and $675,000
for K. Lewis.

(3)

Represents performance-based long-term incentive awards
under the USIP granted on November 3, 2015. The number of shares was
determined by dividing the award value by the closing price of the
Companys common stock on November 3, 2015, the date of grant, rounded up
to the nearest whole share. The awards may vest or become forfeited on
December 20, 2018 based on future performance of the Company. Any
dividends payable on the Companys common stock prior to vesting are paid
upon vesting.

(4)

Represents the equity portion of awards under the KEIP
for fiscal year 2015 performance, which were granted in fiscal year 2016.
Grants of restricted stock include time vesting provisions such that the
award would vest in thirds on August 31, 2016, August 31, 2017 and August
31, 2018. In accordance with the terms of the USIP, the number of shares
of restricted stock issued was determined based on the closing price on
the NYSE of the Companys common stock on the grant date. Any dividends
declared on the Companys common stock are paid on the unvested shares.
Amounts do not include the equity portion of awards that may be made under
the KEIP for fiscal year 2016 because such awards were granted in fiscal
year 2017.

(5)

Mr. Advani terminated employment with the Company
effective December 30, 2016 and these awards will be forfeited on such
date.

Please refer to the Compensation
Discussion and Analysis above for an explanation of salary and bonus in
proportion to total compensation and further details regarding amounts disclosed
in the Summary Compensation Table and Grants of Plan-Based Awards
table.

Outstanding Equity Awards at 2016 Fiscal
Year-End

The following table presents information
concerning the number and value of stock awards held by the named executive
officers as of September 30, 2016. As of September 30, 2016, no stock options
remained outstanding.

The following table presents information
regarding stock awards vesting for the named executive officers during the
fiscal year ended September 30, 2016. There were no stock option
exercises.

Stock
Awards

Name

Number ofShares
Acquiredon Vesting(#)

Value Realizedon
Vesting($)(1)

Gregory E. Johnson

160,590

5,945,653

Vijay C. Advani

64,770

2,430,661

Jennifer M. Johnson

34,376

1,285,356

Kenneth A. Lewis

26,294

988,657

Craig S. Tyle

13,020

480,016

(1)

The value of each stock award
is calculated by multiplying the closing price of the Companys common
stock on the NYSE on the date of vesting by the number of shares that
vested.

Potential
Payments Upon Termination or Change in Control

We have not provided the NEOs with
agreements providing for severance payments, medical or insurance benefits or
any other perquisites after their employment with us has ended or following a
change in control.

As described under Compensation
Discussion and Analysis above in this Proxy Statement, the NEOs have typically
received grants of incentive awards payable in the form of cash under the
Companys AIP and the KEIP, and restricted stock and restricted stock units
under the Companys USIP. Except as set forth below or as otherwise determined
by the Compensation Committee, unearned awards made to a NEO under such plans
are forfeited upon voluntary or involuntary termination of executives
employment with us. In any event, the Compensation Committee, in its sole
discretion, may pay, eliminate or reduce such awards.

AMENDED AND RESTATED ANNUAL
INCENTIVE COMPENSATION PLANCurrently, the AIP
generally provides that a participant must be employed on the payment date to
receive any amounts awarded under the AIP unless expressly set forth in the
participants award agreement. In the event the employment of a participant
under the AIP terminates for any reason, the Compensation Committee or
management, as applicable, may, in its discretion, determine to pay a
participant a pro-rated award under the plan based upon performance for the time
served during the relevant performance period or
the full amount of any award that would have been paid had the participant
remained employed through the entire performance period.

The AIP does not expressly provide for any
changeincontrol payments, however, the Compensation Committee has the discretion
to make awards under the plan in the event of a change in control.

2014 KEY EXECUTIVE INCENTIVE
COMPENSATION PLANAs described in more detail
under Compensation Discussion and AnalysisComponents of Compensation Program
and Fiscal 2016 CompensationLong-term Compensation, the KEIP is a sub-plan
under the AIP. Consequently, all of the provisions described above regarding the
AIP apply to grants made under the KEIP. In addition, the KEIP includes separate
terms regarding termination payments which are summarized below.

If the employment of a participant in the
KEIP terminates due to death, permanent disability or retirement, such
participant is generally entitled to receive payment of any award under the plan
with respect to the fiscal year of such termination. In addition, if a
participant terminates employment with the Company for any reason other than
death, permanent disability or retirement, any award under the plan with respect
to the fiscal year of such termination is generally required to be reduced
proportionately based on

the date of termination. To be eligible to
receive a payment upon retirement from the Company, the participant must retire
after reaching age fifty-five and have at least ten years of service with the
Company. To be eligible for awards in the event of permanent disability, the
executive must be eligible for payments under the Companys long-term disability
insurance policy. In any event, the Compensation Committee, in its sole
discretion, may pay, eliminate or reduce any such awards under the
KEIP.

The KEIP does not expressly provide for
any changeincontrol payments.

2002 UNIVERSAL STOCK
INCENTIVE PLANPursuant to the terms of the
USIP, a change in control of the Company means a proposed dissolution or
liquidation of the Company or a merger or corporate combination (a
Transaction) in which the successor corporation does not agree to assume the
award or substitute an equivalent award. The Compensation Committee must notify
participants of such treatment no later than ten days prior to such proposed
Transaction. Option grants, to the extent not previously exercised, and other
stock-based awards (restricted stock and RSUs) terminate immediately prior to
the consummation of such proposed Transaction.

COMPENSATION COMMITTEE
POLICY & PRACTICENotwithstanding the
discussion above, pursuant to the terms of the KEIP and the AIP, the
Compensation Committee, in its sole discretion, may eliminate or reduce any
unvested awards otherwise payable to a participant following termination of
employment. In addition, the Compensation Committee has the authority to pay the
full award amount to a participant whose award would have otherwise been reduced
or forfeited following termination of employment
or a change in control. The Compensation Committee also has the discretion under
the USIP to determine the terms, conditions, performance criteria, restrictions,
and other provisions of awards made under the USIP.

As a general policy matter, the
Compensation Committee has limited the payment of unvested awards under the
KEIP, the AIP and the USIP following a participants termination of employment.
We expect the Compensation Committee would act similarly upon a change in
control. Payments for unvested awards, if any, made to the NEOs upon the
termination of employment or upon a change in control would be determined on a
case-by-case basis by the Compensation Committee.

ESTIMATED PAYMENTS UPON
TERMINATIONBecause of the Compensation
Committees general policy of limiting payments to the NEOs following
termination of employment and its authority to reduce or increase the payments
otherwise available under awards, the amounts payable to the named executive
officers following termination of employment are not determinable. The following
table sets forth a range of the potential compensation that could become payable
under the KEIP and the AIP if a named executive officers employment had
terminated on September 30, 2016. The amounts provided are based upon the NEOs
compensation and service levels as of September 30, 2016 and, if applicable,
based on the closing price of the Companys common stock on the NYSE on
September 30, 2016, the last trading day of fiscal year 2016.

Name

Death,Disability, orRetirement(1)(2)(3)($)

OtherTermination(4)($)

Gregory E. Johnson

0 - 8,492,500

0 - 3,650,000

Vijay C. Advani(5)

0
- 3,973,829

0
- 2,250,000

Jennifer M. Johnson

0 - 2,606,678

0 - 1,550,000

Kenneth A. Lewis

0
- 1,944,653

0
- 1,190,000

Craig S. Tyle

0 - 1,334,900

0  870,000

(1)

Amounts included in this
column range from $0 to a maximum payment under the KEIP which is based on
the executives fiscal year 2015 cash bonus, plus the cash value of the
executives unvested stock awards excluding Equity Incentive Plan Awards
listed under the column Stock Awards in the Outstanding Equity Awards
at 2016 Fiscal Year-End table above, as determined in the discretion of
the Compensation Committee.

(2)

Disability, as defined under
the KEIP, means a permanent and total disability determined in accordance
with uniform and nondiscriminatory standards adopted by the Company from
time to time.

(3)

As of September 30, 2016, each
of Messrs. G. Johnson, Advani, Lewis and Tyle were eligible for retirement
purposes under the KEIP based on his age and tenure with the
Company.

Under the KEIP, if a
participant is terminated other than due to death, disability or
retirement, the Compensation Committee may pay a pro-rated award based on
the time employed during the performance period or use its discretion to
increase, reduce or entirely eliminate the award. Currently, upon
termination for any reason, awards under the AIP are forfeited. The
Compensation Committee, however, has the discretion to pay the participant
a pro-rated cash award under the AIP based on performance during the plan
year through the termination date or the full amount of any award as if
the participant had remained employed through the end of the performance
period. Amounts included in this column range from $0 to a maximum payment
which is based on the executives fiscal year 2015 cash bonus only, as
determined in the discretion of the Compensation
Committee.

(5)

Mr. Advani terminated
employment with the Company effective December 30, 2016 and will not be
eligible for any payments upon such
termination.

ESTIMATED PAYMENTS UPON A
CHANGE IN CONTROLNone of the NEOs have
agreements that provide for payments upon a change in control of the Company.
However, under the USIP, the Compensation Committee has the discretion to make a
determination as to the equitable treatment of awards upon a change in control.
The Compensation Committee may, in its discretion, make cash awards under the
KEIP and the AIP and awards of restricted stock under the USIP following a
change in control. The following table sets forth an estimate of the potential
compensation that may become payable under the USIP, the KEIP and the AIP upon a
change in control of the Company. A change in control of the Company is deemed
to have occurred upon the occurrence of certain transactions as defined in the
USIP. The amounts provided are based upon the named executive officers
compensation and service levels as of September 30, 2016, and if applicable,
based on the closing price of the Companys common stock on the NYSE on
September 30, 2016, the last trading day of fiscal year 2016.

Name

Cash(1)($)

Unvested Value
of
Restricted Stock(2)($)

Total($)

Gregory E. Johnson

0  3,650,000

0  12,030,628

0 - 15,680,628

Vijay C. Advani

0
 2,250,000

0
 4,712,847

0
 6,962,847

Jennifer M. Johnson

0  1,550,000

0  3,246,296

0  4,796,296

Kenneth A. Lewis

0
 1,190,000

0
 2,041,362

0
 3,231,362

Craig S. Tyle

0  870,000

0  560,725

0  1,430,725

(1)

Amounts included in this
column range from $0 to a maximum payment which is based on the
executives fiscal year 2015 cash bonus.

(2)

Amounts included in this
column range from $0 to a maximum payment which is based on the cash value
of the executives unvested stock awards listed under the column Stock
Awards in the Outstanding Equity Awards at 2016 Fiscal Year-End table
above and determined at the discretion of the Compensation
Committee.

Compensation Committee Interlocks and Insider
Participation

During fiscal year 2016, the following
directors served as members of the Compensation Committee: Messrs. Barker
(Chairman), Pigott and Waugh. No member of the Compensation Committee was an
officer or employee of the Company or any of its subsidiaries during fiscal year
2016, and no member of the Compensation Committee was formerly an officer of the
Company or any of its subsidiaries or was a party to any disclosable related
party transaction involving the Company. During fiscal year 2016, none of the
executive officers of the Company served on the board of directors or on the
compensation committee of any other entity that has or had executive officers
serving as a member of the Board of Directors or Compensation Committee of the
Company.

Notwithstanding anything to the
contrary set forth in any of the Companys previous or future filings under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, that might incorporate filings made by us under those statutes, the
following report shall not be deemed to be soliciting material, or to be
incorporated by reference into any prior filings or future filings made by the
Company under those statutes.

The Audit Committee of the Board of
Directors of Franklin Resources, Inc. currently consists of Mr. Ratnathicam
(Chairman), Mss. Byerwalter and Stein, and Mr. Yang. Each of the members of the
Audit Committee is independent as defined under the NYSE listing standards and
applicable law. The Audit Committee members are not professional accountants or
auditors, and their functions are not intended to duplicate or to certify the
activities of management or the Companys independent registered public
accounting firm. The primary purpose of the Audit Committee is to assist the
Board of Directors in fulfilling its responsibility to oversee (i) the Companys
financial reporting, auditing and internal control activities, including the
integrity of the Companys financial statements, (ii) the Companys compliance
with legal and regulatory requirements, (iii) the independent auditors
qualifications and independence, and (iv) the performance of the Companys
internal audit function and independent auditor. The Audit Committees function
is more fully described in the Committees written charter, which is posted in
the corporate governance section of the Companys website at http://www.franklinresources.com/corp/pages/
generic_content/corporate_governance/audit_committee_
charter.jsf.

Review of
the Companys Audited Financial Statements for the Fiscal Year Ended September
30, 2016

The Audit Committee has reviewed and
discussed the audited financial statements of the Company for the fiscal year
ended September 30, 2016 with the Companys management.

The Audit Committee has discussed with
PricewaterhouseCoopers LLP (PwC), the Companys
independent registered public accounting firm, the matters required to be
discussed by Auditing Standard No. 16, Communications with Audit Committees, as
adopted by the Public Company Accounting Oversight Board.

The Audit Committee has also received the
written disclosures and the letter from PwC required by the applicable Public
Company Accounting Oversight Board requirements for independent accountant
communications with audit committees concerning auditor independence, and has
discussed the independence of PwC with that firm.

Based on the Audit Committees review and
discussions noted above, the Audit Committee recommended to the Board of
Directors that the Companys audited financial statements be included in the
Companys Annual Report on Form 10-K for the fiscal year ended September 30,
2016 for filing with the Securities and Exchange Commission.

The Audit Committee of the Board, with the
ratification of the stockholders, engaged PwC to perform an annual audit of the
Companys consolidated financial statements for fiscal year 2016.

The following table sets forth the
approximate aggregate fees billed or expected to be billed to the Company by PwC
for fiscal years 2016 and 2015 for the audit of the Companys annual
consolidated financial statements and for other services rendered by
PwC.

Fiscal Year

2016

2015

(in thousands)

Audit Fees(a)

$

6,233

$

6,476

Audit-Related Fees(b)

$

1,412

$

1,606

Tax
Fees(c)

$

113

$

110

All Other Fees(d)

$

2,427

$

2,704

TOTAL FEES

$

10,185

$

10,896

(a)

The 2016 Audit Fees amount includes approximately $33,500 of fees
related to fiscal year 2015 that were billed in fiscal year 2016 and the
2015 Audit Fees include approximately $139,700 of fees related to fiscal
year 2014 that were billed in fiscal year 2015.

(b)

Audit-Related Fees consist of assurance and related services that
are reasonably related to the performance of the audit or review of the
Companys financial statements. Such services related primarily to
internal control examinations pursuant to Service Organization Control
(SOC) 1, consultation concerning financial accounting and reporting
standards, attestation services and audits of employee benefit
plans.

Other Fees includes $74,900 of fees that have been contracted with
the Company but which are expected to be paid by a third party. The
remainder of Other Fees consists principally of services rendered in
connection with assistance in regulatory reporting in various
jurisdictions and services provided to certain of our funds. In fiscal
year 2016, services provided to the funds included $1,815,000 of audit and
audit related services, incurred by the Company in return for a fixed
administration fee.

Note: For fiscal year 2016, 2.8% of the
fees for services described under Audit-Related Fees, Tax Fees and All Other
Fees were approved by the Audit Committee pursuant to the pre-approval waiver
requirements under 17 CFR 210.2-01(c)(7)(i)(C), all of which represented
All Other Fees. For fiscal year 2015, none of the
services described under Audit-Related Fees, Tax Fees and All Other Fees were
approved by the Audit Committee pursuant to the pre-approval waiver requirements
under 17 CFR 210.2-01(c) (7)(i)(C).

Pre-approval Process and Policy

The audit and non-audit services provided
to the Company and its subsidiaries by PwC, the independent auditors, during
fiscal years 2016 and 2015 were pre-approved by the Audit Committee. The Audit
Committee has adopted policies and procedures for pre-approving all audit and
non-audit services provided by PwC. This policy describes the permitted audit,
audit-related, tax and other services that the independent auditors may
perform.

Any requests for audit, audit-related, tax
and other services must initially be submitted to the Companys Chief Financial
Officer. Any requests preliminarily approved by the CFO are then submitted to the Audit Committee for final pre-approval.
Normally, pre-approval is considered at regularly scheduled meetings. However,
the authority to grant specific pre-approval between meetings up to a designated
approval amount, which amount for fiscal year 2016 was $50,000 (the Chairman
Approval Amount), has been delegated to the Chairman of the Audit Committee.
The decision of the Chairman to grant specific pre-approval of a service is
presented to the Audit Committee at its scheduled meetings. If the estimated
fees for proposed services exceed the Chairman Approval Amount, specific
pre-approval by the entire Audit Committee is required.

For fiscal year 2016, Rupert H. Johnson,
Jr., Vice Chairman and a director of the Company, who, among other family
relationships, is the uncle of Gregory E. Johnson, Chairman of the Board, Chief
Executive Officer and a director of the Company, Charles E. Johnson, a director
of the Company and Jennifer M. Johnson, Co-President, received a base salary of
$181,385. Mr. R. H. Johnson, Jr. did not receive a cash bonus in fiscal year
2016.

David A. Lewis, Sr., Senior Vice
President, Head of Americas Trading for Franklin Templeton Services, LLC, is the
brother of Kenneth A. Lewis, one of the Companys named executive officers and
the Executive Vice President and Chief Financial Officer of the Company. In
fiscal year 2016, Mr. D. Lewisbase salary was $226,931 and he received a
bonus of $295,750 in cash and 3,847 shares of restricted stock.

Messrs. Rupert H. Johnson, Jr. and David
A. Lewis, Sr. are entitled to receive medical, life and disability insurance
coverage and other benefits available generally to employees of the Company
and/or its subsidiaries.

Share Repurchases.
In order to pay taxes due in connection with
the vesting of employee and executive officer restricted stock and restricted
stock unit awards under the USIP, the Company uses a net stock issuance method,
equivalent to a stock repurchase program, to pay such taxes. For shares
repurchased in connection with the payment of taxes on vesting shares, the
repurchase price is the closing price on the NYSE on the date of the
transaction.

During fiscal year 2016, the Company
repurchased shares of common stock from the executive officers listed below for
the aggregate consideration shown.

Name and Title

Number of SharesRepurchased

AggregateConsideration($)

Vijay C. Advani,

29,828

1,123,458

Co-President

Kenneth A.
Lewis,

10,676

(1)

404,774

Executive Vice President and Chief Financial
Officer

Craig S. Tyle,

5,026

185,949

Executive Vice President and General Counsel

(1)

Amount does not include 855
shares repurchased by the Company for $31,208 from David A. Lewis, Sr.,
Senior Vice President, Head of Americas Trading for Franklin Templeton
Services, LLC, a subsidiary of the Company, and the brother of Kenneth A.
Lewis.

Management and Use of AC
Travel Aircraft. A wholly-owned subsidiary of
the Company entered into an amended and restated aircraft management agreement,
effective as of June 1, 2008, with AC Travel, LLC (AC Travel), an entity owned
and controlled by Charles B. Johnson, Chairman of the Board and a director of
the Company until June 2013 and currently employed as an Executive Consultant
who, among other family relationships, is the father of Gregory E. Johnson,
Chairman of the Board, Chief Executive Officer and a director of the Company,
Charles E. Johnson, a director of the Company and Jennifer M. Johnson
Co-President of the Company and brother of Rupert H. Johnson, Vice Chairman and
a director of the Company to manage the operations of a Gulfstream III aircraft (the G-III) and a Gulfstream G550 aircraft
(the G550), both of which are owned by AC Travel. We refer to the G-III and
the G550 as the Aircraft. Under the management agreement, the subsidiary: (a)
provides consulting and management services for the operations of the Aircraft;
(b) provides flight crew personnel, including coordinating training of such
personnel; (c) arranges for maintenance of the Aircraft; and (d) arranges for
insurance and a hangar for Aircraft storage and also provides other
administrative services. The agreement has automatic one-year renewals, subject
to cancellation by either party. Our subsidiary receives a monthly management
fee of $10,000 for the G550 and $3,000 for the G-III for administrative

services. Out-of-pocket costs incurred
under the agreement for services provided are either reimbursed by, or passed
through to and paid by, AC Travel.

Office Lease.
In October 2009, the Board approved a
three-year fixed term extension of a lease of approximately 5,495 square feet of
office space owned by the Company in San Mateo, California with Tano Capital,
LLC (Tano), a company owned by Charles E. Johnson, a director of the Company,
brother of Gregory E. Johnson and Jennifer M. Johnson and nephew of Rupert H.
Johnson, Jr. In November 2012, Tano and the Company entered into an amendment
extending the original lease for a fixed five-year term and reducing the office
space leased by Tano on the San Mateo campus from 5,495 square feet to 4,125
square feet. The lease amendment also granted Tano the option to increase the
size of the office space to 5,495 square feet, which Tano exercised effective April 16, 2014. The current periodic
payments due under the lease extension are $190,224 per annum. The aggregate
amount of all periodic payments due under the lease during fiscal year 2016 was
$190,224.

Private Equity Fund
Investment. On July 6, 2011, Franklin
Templeton Capital Holdings Private Limited, a subsidiary of the Company, entered
into an agreement to make a $25 million dollar investment commitment to Tano
India Private Equity Fund II (Tano Fund). Tano Mauritius Investments, which is
the investment manager and a Class B and Class C shareholder of the Tano Fund,
is a direct subsidiary of Tano Capital, LLC, which is owned by Charles E.
Johnson. During fiscal year 2016, the Company made payments of $2,403,413 in the
aggregate in response to capital calls. Subsequently, $1,593,245 of recallable
capital was returned, resulting in a net fiscal year investment of
$810,168.

Related
Person Transaction Policy

Related Person
Transaction Policy. The Board of Directors
has adopted a Related Person Transaction Policy (Related Person Transaction
Policy) to address the reporting, review, approval and ratification of related
person transactions. Related persons include the Companys executive officers,
directors and director nominees, holders of more than five percent (5%) of a
class of the Companys voting securities, and immediate family members of the
foregoing persons. A related person transaction means a transaction or series
of transactions in which the Company participates and a related person has a
direct or indirect interest. Examples include sales, purchases and transfers of
real or personal property, use of property and equipment by lease or otherwise,
services received or furnished and borrowings and lendings, including
guarantees. Transactions with executive officers and directors for the purposes
of conducting the business of the Company, compensation of directors approved by
the Board and compensation arrangements approved by the Compensation Committee
are not considered related person transactions. All related person transactions
are required to be reported to the Audit Committee. However, the Audit Committee
has the authority to determine categories of related person transactions that
are immaterial and not required to be disclosed and that need not be reported
to, reviewed by, and/or approved or ratified by the Audit Committee. Pursuant to
the Related Person Transaction Policy, the following related person transactions
need not be reported to, reviewed by, and/or approved or ratified by the Audit
Committee:

●

The establishment or maintenance of
a trading, investment management, custody or other account with an
affiliate of the Company, if the terms of such account are generally the
same as or similar to accounts offered by the affiliate of the Company in
the ordinary course to persons who are not related
persons.

●

Accounts invested in shares of one
or more investment companies or portfolios in Franklin Templeton
Investments (FT Fund) that are established and/or maintained by a
related person on terms set forth in the applicable FT Fund prospectus or
other disclosure documents.

●

Gross-ups and perquisites and other
personal benefits from the use of Company owned or provided assets,
including but not limited to personal use of Company-owned or provided
aircraft and property, not used primarily for Company business purposes
that, in the aggregate, are less than $10,000 in any fiscal
year.

Audit Committee Review
and Approval. Every quarter the Audit
Committee reviews related person transactions. Such transactions involving an
estimated amount of $120,000 or more require the approval or ratification of the
Audit Committee. In connection with approving or ratifying a related person
transaction, the Audit Committee will consider the relevant facts and
circumstances of the transaction and any of the following factors that are
relevant:

●

The position or relationship of the
related person at or with the Company;

●

The materiality of the transaction
to the related person, including the dollar value of the
transaction;

●

The business purpose for and
reasonableness of the transaction;

●

Whether the related person
transaction is comparable to a transaction that could be available on an
arms-length basis or is on the terms that the Company offers generally to
persons who are not related persons;

Whether the related person
transaction is in the ordinary course of the Companys business;
and

●

The effect of the transaction on the
Companys business and operations.

In addition, the Audit Committee has the
authority to pre-approve certain categories of related person transactions,
which transactions must still be reported to the Audit Committee at least
annually. The Audit Committee has determined that Company purchases of shares of
its common stock to pay taxes due by employees in
connection with the vesting of employee and executive officer restricted stock
and restricted stock unit awards under the USIP are pre-approved, but should be
reported to the Audit Committee annually. The Audit Committee may delegate its
authority to review, approve or ratify specified related person transactions to
one or more members of the Audit Committee between scheduled committee meetings.
Any determination made pursuant to this delegated authority must be presented to
the full Audit Committee at a subsequent meeting.

SECTION 16(a) BENEFICIAL OWNERSHIPREPORTING
COMPLIANCE

Section 16(a) of the Securities Exchange
Act of 1934, as amended, requires officers, directors and persons who
beneficially own more than 10% of the Companys common stock to file reports of
ownership on Form 3 and changes in ownership on Forms 4 or 5 with the SEC. The
reporting officers, directors and 10% stockholders are also required by SEC
rules to furnish the Company with copies of all Section 16(a) reports they
file.

Based solely on its review of copies of
such reports received or written representations from such executive officers,
directors and 10% stockholders, the Company believes that all Section 16(a)
filing requirements applicable to its directors, executive officers and 10%
stockholders were complied with during fiscal year 2016.

In accordance with Section 14A of the
Securities Exchange Act of 1934, which was added by the Dodd-Frank Wall Street
Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act) and the
related SEC rules promulgated thereunder, we are providing our stockholders the
opportunity to cast a non-binding advisory vote to approve the compensation of
the named executive officers. This proposal, commonly known as a say-on-pay
proposal, gives our stockholders the opportunity to express their views on the
compensation of our named executive officers.

The primary objectives of our executive
compensation program are to (i) offer balanced total compensation in an effort
to satisfy our stockholder, Company-wide, business unit and individual executive
goals, (ii) attract and retain high caliber executives and key personnel by
offering competitive compensation, (iii) align the compensation of executives
with the goals of the Company by offering performance incentives and (iv)
provide that a significant portion of long-term compensation is at risk based
on performance. The foregoing objectives are applicable to the compensation of
our named executive officers. We urge our stockholders to review the
Compensation Discussion and Analysis section above and the compensation tables
and narrative discussion above for more information.

We believe that our executive compensation
program, which ties a significant portion of pay to performance, provides
competitive compensation to our named executive officers and utilizes components that align the interests of our executives with
stockholders. We believe this approach helps make our management team a key
driver in our financial performance.

For these reasons, the Board recommends a
vote in favor of the following resolution:

Resolved, that the compensation paid
to the Companys named executive officers, as disclosed pursuant to Item 402 of
Regulation S-K, including the compensation tables and narrative discussion, is
hereby APPROVED, on a non-binding, advisory basis.

As an advisory vote, this proposal is not
binding upon us. Notwithstanding the advisory nature of this vote, the Board
values the opinions expressed by stockholders in their vote on this proposal,
and will consider the outcome of the vote when making future compensation
decisions for our named executive officers.

The affirmative vote of the holders of a
majority of the votes cast by our stockholders in person or represented by proxy
and entitled to vote is required to approve this Proposal 2.

RECOMMENDATION OF THE
BOARDThe Board recommends a vote
FOR the approval of the Companys executive
compensation program. The voting requirements for this proposal are
described in the Voting Information section
above.

As required by Section 14A of the Exchange
Act and in accordance with the Dodd-Frank Act, we are providing our stockholders
with the opportunity to vote, on a non-binding, advisory basis, on whether the
Company will seek an advisory vote on the compensation of our NEOs every one,
two or three years. By voting on this proposal, you will be able to specify how
frequently stockholders would like us to hold an advisory vote on the
compensation of our named executive officers.

Our Board has determined that an advisory
vote on executive compensation that occurs every three years is the most
appropriate alternative for the Company and therefore the Board is again
recommending that stockholders select a frequency of once every three years. The
Board considers that an advisory vote at such frequency will provide our
stockholders with sufficient time to evaluate the effectiveness of our overall
compensation philosophy, objectives and practices in the context of our
long-term business results, while avoiding over emphasis on short-term
fluctuations in compensation and business results that could occur over shorter
periods. An advisory vote occurring once every three years also permits our
stockholders to fully observe and evaluate the impact of any changes to our
executive compensation philosophy and objectives which have occurred since the
last advisory vote on executive compensation,
including any changes in response to the outcome of a prior advisory vote on
executive compensation. The holders of a majority of the Companys outstanding
shares agreed with our approach when the last advisory vote was solicited and
selected a frequency of once every three years.

With respect to the advisory proposal on
the frequency of holding future advisory votes on the compensation of our named
executive officers, you may vote for One Year, Two Years or Three Years or
mark your proxy Abstain. We will consider stockholders to have expressed a
non-binding preference for the frequency that receives the highest number of
favorable votes.

Although this proposal is advisory, the
Board values the opinion of our stockholders and will consider the voting
results when making decisions regarding the frequency of future advisory votes
on the compensation of our named executive officers. You may cast your vote on
your preferred voting frequency by choosing the option of one year, two years or
three years when you vote in response to this proposal, and you may also abstain
from voting on the proposal. The persons named in the accompanying proxy card
intend to vote proxies received by them in favor of Three Years unless a
different choice is specified.

RECOMMENDATION OF THE
BOARDThe Board recommends that an
advisory vote to approve the compensation of the Companys named executive
officers be held every THREE
YEARS.

PROPOSAL NO. 4 RATIFICATION OF THE APPOINTMENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM

The Audit Committee of the Board has
appointed PricewaterhouseCoopers LLP as the independent registered public
accounting firm to audit the Companys consolidated financial statements for the
fiscal year ending September 30, 2017 and to audit the Companys internal
control over financial reporting as of September 30, 2017. During and for the
fiscal year ended September 30, 2016, PricewaterhouseCoopers LLP audited and
rendered opinions on the financial statements of the Company and certain of its
subsidiaries and many of the open-end and closed-end investment companies
managed and advised by the Companys subsidiaries. PricewaterhouseCoopers LLP
also rendered an opinion on the Companys internal control over financial reporting as of September 30, 2016. In addition,
PricewaterhouseCoopers LLP provides the Company with tax consulting and
compliance services, accounting and financial reporting advice on transactions
and regulatory filings and certain other consulting services not prohibited by
applicable auditor independence requirements. See Fees Paid to Independent
Registered Public Accounting Firm above. Representatives of
PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting and
will have the opportunity to make a statement if they desire to do so. It is
also expected that they will be available to respond to appropriate
questions.

RECOMMENDATION OF THE
BOARDThe Board
recommends a vote FOR the ratification of the appointment of
PricewaterhouseCoopers LLP as the Companys independent registered public
accounting firm for the fiscal year ending September 30, 2017. The voting
requirements for this proposal are described in the Voting Information
section. If the appointment is not ratified, the Audit Committee may
reconsider the selection of PricewaterhouseCoopers LLP as the Companys
independent registered public accounting
firm.

A stockholder of the Company has advised
us that she will ask you to vote on a proposal at the Annual Meeting.

Juliet Schor has submitted the following
proposal (the address and number of shares of the Companys common stock held by
this stockholder will be provided upon request):

Whereas: Franklin Resources (FR) is a respected leader in the financial services
industry. FR has stated publicly that it understands how environmental, social,
and governance (ESG) factors can affect companies financially. On its website,
the Company states ESG issues may affect the value of an investment.

FR reports upon and acts to mitigate
greenhouse gas emissions associated with its operations. Climate change has been
incorporated into the FRs enterprise and investment risk assessment processes
as part of its ESG integration. In its response to a survey by the Carbon
Disclosure Project, FR states:

The ESG team partners with Investment
Managers to enhance the integration of ESG considerations in the investment
process in order to manage risk and increase returns, as ESG issues like
climate change can impact the performance of securities.

FR and its subsidiaries are responsible
for voting proxies of companies in their portfolios. Aside from buy and sell
decisions, proxy voting is one of the principal ways in which investors can
engage in active management of portfolio risks and opportunities related to
climate change. Many resolutions on the topic of climate change voted on by FR
simply asked for more disclosure. But according to public fund voting records,
over the past few years, funds managed by subsidiaries of FR voted against the
vast majority of these resolutions. This is in
contrast to funds managed by investment firms such as Morgan Stanley, Wells
Fargo, Neuberger Berman, and AllianceBernstein who supported the majority of
them and investors like Goldman Sachs, State Street and MFS voted in favor of a
significant percentage. Nothing in FRs disclosures provides investors with
information to evaluate whether the companys votes and positions on climate are
consistent.

These incongruities could pose a
reputational risk to the company, in contrast to actions by competing investment
firms. Proxy voting records on climate have come under increased media scrutiny
(Vanguard and BlackRock branded hypocritical, FT Adviser, September 6, 2016). Given
the severe impact of climate change, there is risk to the company and its
clients if its proxy voting practices consistently oppose disclosure and
reasonable actions to address climate change risks.

Resolved: Shareowners request that the Board of Directors issue a climate change
report to shareholders by September 2017, at reasonable cost and omitting
proprietary information. The report should review and evaluate consistency
between the companys focus on climate change as a sustainability issue, and its
proxy voting practices for FR and its subsidiaries within the last
year.

This assessment should review votes cast
that appear to be inconsistent with the company's emphasis on climate change as
a sustainability issue and explain the incongruency. The report should also
discuss policy measures that the company may adopt to help enhance congruency
between climate policies and proxy voting, including how risks are managed
through engagement with investee companies.

RECOMMENDATION OF THE
BOARDThe Board of Directors recommends a vote AGAINST this
proposal for the following reasons:

The Companys responsibilities to
its stockholders differ from the responsibilities of the Companys
investment adviser subsidiaries (the FTI Advisers) to the clients on
whose behalf they hold securities. The
Company must act in what it believes to be the best interests of the
corporation and its stockholders, including appropriately addressing
climate change. The Company is proud of its record of taking steps to
reduce the Companys environmental impact, including recycling and reuse
of natural resources, seeking to minimize energy consumption and
mitigating greenhouse gas emissions associated with the Companys
operations. At the same time, the FTI Advisers, and not the Company, are
responsible for voting proxies on behalf of their clients. When voting
proxies, the FTI Advisers must act solely in the best interest of their
clients.

The FTI Advisers consider climate
change and other ESG-related issues when voting proxies.The FTI Advisers proxy voting policies provide that
votes cast on ESG issues will be at the discretion of a funds individual
portfolio managers. The FTI Advisers and their portfolio managers will
generally vote in favor of ESG proposals that they believe have
significant economic benefits for their clients. Neither the Company, nor
the FTI Advisers, have ever stated that the FTI Advisers would vote for
any particular climate change proposal or percentage of such proposals. To
the extent an FTI Adviser votes against an ESG-related proposal, it is
because the portfolio managers within the FTI Adviser determined that such
proposal would not have significant economic benefits for their clients.
This reflects the fiduciary obligations of the FTI Advisers to their
clients.

A report on the Companys proxy
voting record related to climate change would not benefit the Company or
its stockholders.We believe that the
concerns stated in the stockholder proposal are already addressed by the
FTI Advisers current proxy voting policies and we do not believe that a
report on the proxy voting record of the FTI Advisers on climate
change-related proposals would provide any additional benefit to the
Company or its stockholders. The stockholder proposal would involve the
Company and its Board of Directors to a much greater extent in these proxy
votes and potentially subject investment personnel at the FTI Advisers to
inappropriate influence. We are also concerned that the stockholder
proposal, if implemented, would elevate the social objectives of an owner
of the Companys shares over the FTI Advisers fiduciary duty to vote
proxies solely in their clients best interests.

A stockholder of the Company has advised
us that it will ask you to vote on a proposal at the Annual Meeting.

The Stephen M. Silberstein Revocable Trust
has submitted the following proposal (the address and number of shares of the
Companys common stock held by this stockholder will be provided upon
request):

Whereas: Franklin Templeton Investments, like all investment managers, is
responsible for voting proxies of companies in its portfolios. It has a
fiduciary responsibility to vote proxies in a responsible manner in the
interests of its clients, which includes ensuring that executive pay is not
excessive and, if it deviates from the average, is strictly and sufficiently
tied to performance.

Benjamin Franklin embodies thrift, and is
known for the saying, A penny saved is a penny earned. The current system of
executive pay generally does not follow this principle; indeed, it embodies
waste and greed. Franklin Templeton Investments votes in favor of most excessive
executive compensation packages (see As You Sows The 100 Most Overpaid
CEOs).

We find Franklin Templeton Investments
voting record inconsistent with its guidelines. Each of Franklin Templetons
affiliated investment managers votes separately, under guidelines that note:
The Investment Manager evaluates plans on a case-by-case basis by considering
several factors to determine whether the plan is fair and reasonable. Fair and
reasonable are reasonable objectives, but do not appear to be reflected in the
Funds voting practices.

In a comparison of Franklin Templetons
2015 votes on pay to those of six large pension funds, a number of instances
were identified in which the majority of those public funds voted against the
pay packages, while Franklin Templeton Investments voted in favor.

In some cases, Franklin Templeton
affiliated managers voted differently on the same advisory pay proposal. In
2015, five of the six public funds voted against the advisory vote on pay at
Caterpillar; of the nine Franklin Templeton Funds which held the stock, five
voted in favor and four opposed the proposal. Investors who own share in a
Franklin Templeton affiliated fund can find out how funds voted, but do not have
a way to understand the discrepancy.

Numerous academic studies, for example
Lucien Bebchucks Pay Without Performance, indicate a history of growing
executive pay disconnected from company performance. Even when companies purport
to link performance, in reality they often do not.

Resolved: Shareowners request the Board of Directors issue a report by December
2018, at reasonable cost and omitting proprietary information, which evaluates
options for bringing its voting practices in line with its stated principle of
linking executive compensation and performance, including adopting changes to
proxy voting guidelines, adopting best practices of other asset managers and
independent rating agencies, and including a broader range of research sources
and principles for interpreting compensation data. Such report should assess
whether and how the proposed changes would advance the interests of its clients
and shareholders.

RECOMMENDATION OF THE BOARDThe Board of Directors
recommends a vote AGAINST this proposal for the following
reasons:

The Companys responsibilities to
its stockholders differ from the responsibilities of the Companys
investment adviser subsidiaries (the FTI Advisers) to the clients on
whose behalf they hold securities. The
Company must act in what it believes to be the best interests of the
corporation and its stockholders, including appropriately addressing
executive compensation. At the same time, the FTI Advisers, and not the
Company, are responsible for voting proxies on behalf of their clients.
When voting proxies, the FTI Advisers must act solely in the best interest
of their clients.

The FTI Advisers consider the
relationship between executive compensation and performance when voting
proxies. The FTI Advisers proxy voting
policies provide that votes cast on executive compensation issues will be
at the discretion of a funds individual portfolio managers. The FTI
Advisers and their portfolio managers will generally vote in favor of
executive compensation proposals that they believe have significant
economic benefits for their clients. Neither the Company, nor the FTI
Advisers, have ever stated that the FTI Advisers would vote for any
particular executive compensation proposal or percentage of such
proposals. To the extent an FTI Adviser votes against a proposal related
to executive compensation, it is because the portfolio managers within the
FTI Adviser determined that such proposal would not have significant
economic benefits for their clients. The fact that certain portfolio
managers at the FTI Advisers vote for a particular executive compensation
proposal and others against the same proposal, as highlighted in Proposal
No. 6, is evidence of the discretion afforded the portfolio managers
employed by the FTI Advisers. This voting policy is consistent with the
fiduciary obligations of the FTI Advisers to their clients.

A report on the Companys proxy
voting record related to executive compensation would not benefit the
Company or its stockholders. We believe
that the concerns stated in the stockholder proposal are already addressed
by the FTI Advisers current proxy voting policies and we do not believe
that a report on the proxy voting record of the FTI Advisers on proposals
related to executive compensation would provide any additional benefit to
the Company or its stockholders. The stockholder proposal would involve
the Company and its Board of Directors to a much greater extent in these
proxy votes and potentially subject investment personnel at the FTI
Advisers to inappropriate influence. We are also concerned that the
stockholder proposal, if implemented, would elevate the governance
objectives of an owner of the Companys shares over the FTI Advisers
fiduciary duty to vote proxies solely in their clients best
interests.

Stockholder
Proposals and Nominations of Directors at 2018 Annual Meeting

If a stockholder intends to present any
proposal for inclusion in the Companys proxy statement in accordance with Rule
14a-8 promulgated under the Securities Exchange Act of 1934, as amended, for
consideration at the Companys 2018 annual meeting of stockholders, the proposal
must be received by the Secretary of the Company by September 6, 2017. Such
proposal must also meet the other requirements of the rules of the SEC relating
to stockholder proposals.

The Companys Amended and Restated Bylaws
contain an advance notice of stockholder business and nominations requirement
(Section 2.3 of the Amended and Restated Bylaws), which generally prescribes the
procedures that a stockholder of the Company must follow if the stockholder
intends, at an annual or special meeting of stockholders, to nominate a person
for election to the Companys Board of Directors or to propose other business to
be considered by stockholders. These procedures include, among other things,
that the stockholder give timely notice to the Secretary of the Company of the
nomination or other proposed business, that the notice contain specified
information, and that the stockholder comply with certain other requirements.
Generally, in the case of an annual meeting of stockholders, a stockholders
notice in order to be timely must be delivered in writing to the Secretary of
the Company, at its principal executive office, not later than the close of
business on the 120th day nor earlier than the close of business on the 150th
day prior to the first anniversary of the date on which the Company first (i)
mailed its notice of annual meeting, proxy statement and proxy or (ii) sent its
notice of annual meeting and notice of internet availability of its proxy
materials, whichever is earlier, for the immediately preceding years annual
meeting. As specified in the Amended and Restated Bylaws, different notice deadlines apply in the case of a special
meeting, or when the date of an annual meeting is more than 30 days before or
after the first anniversary of the prior years meeting. If a stockholders
nomination or proposal is not in compliance with the procedures set forth in the
Amended and Restated Bylaws, the Company may disregard such nomination or
proposal.

Accordingly, if a stockholder of the
Company intends, at the Companys 2018 annual meeting of stockholders, to
nominate a person for election to the Companys Board of Directors or to propose
other business, the stockholder must deliver a notice of such nomination or
proposal to the Companys Secretary not later than the close of business on
September 6, 2017, and not earlier than the close of business on August 7, 2017,
and comply with the requirements of the Amended and Restated Bylaws. If a
stockholder submits a proposal outside of Rule 14a-8 for the Companys 2018
annual meeting of stockholders and such proposal is not delivered within the
time frame specified in the Amended and Restated Bylaws, the Companys proxy may
confer discretionary authority on persons being appointed as proxies on behalf
of the Company to vote on such proposal.

You may specify whether you would prefer
to direct your communication to the full Board of Directors, only the
non-management directors or any other particular individual director.
Stockholders making such communications are encouraged to state that they are
stockholders and provide the exact name in which their shares are held and the
number of shares held.

In addition, the Company has established
separate procedures for its employees to submit concerns on an anonymous and
confidential basis regarding questionable accounting, internal accounting
controls or auditing matters and possible violations of the Companys Code of
Ethics and Business Conduct, securities laws or other laws, which are available
on the Companys Intranet.

Non-employees may submit any complaint
regarding accounting, internal accounting controls or auditing matters directly
to the Audit Committee of the Board of the Directors by sending a written
communication appropriately addressed to:

Whether you received the Notice of
Internet Availability of Proxy Materials or paper copies of proxy materials, the
Companys proxy materials, including this Proxy Statement and our Annual Report,
are available for you to review online. To request a paper copy of proxy
materials, please call 1-800-579-1639, or you may request a paper copy by email
at sendmaterial@proxyvote.com, or by logging onto www.proxyvote.com.

The SEC has adopted rules that permit
companies and intermediaries (such as banks and brokers) to satisfy the delivery
requirements for proxy statements and annual reports with respect to two or more
stockholders sharing the same address by delivering a single Notice of Internet
Availability of Proxy Materials (or proxy materials in the case of stockholders
who receive paper copies of proxy materials), addressed to those stockholders.
This process, which is commonly referred to as householding, potentially means
extra convenience for stockholders and cost savings for companies.

A number of banks and brokers with account
holders who are beneficial holders of the Companys common stock will be
householding the Companys Notice of Internet Availability of Proxy Materials
(or proxy materials in the case of stockholders who receive paper copies of
proxy materials). If you have received notice from your bank or broker that it
will be householding communications to your address, householding will continue until you are notified otherwise or
until you revoke your consent. If, at any time, you no longer wish to
participate in householding and would prefer to receive a separate Notice of
Internet Availability of Proxy Materials (or proxy material, if applicable),
please notify your bank or broker, or contact Investor Relations, Franklin
Resources, Inc., One Franklin Parkway, San Mateo, CA 94403-1906, Telephone (650)
312-4091. The Company undertakes, upon oral or written request, to deliver
promptly a separate copy of the Companys Notice of Internet Availability of
Proxy Materials (or proxy materials, if applicable) to a stockholder at a shared
address to which a single copy of the document was delivered. Stockholders who
currently receive multiple copies of the Notice of Internet Availability of
Proxy Materials (or proxy materials, if applicable) at their address and would
like to request householding of their communications should contact their bank
or broker or Investor Relations at the contact address and telephone number
provided above.

The Companys Annual Report for fiscal
year 2016 is available for viewing on the Companys website at www.franklinresources.com
at Annual Meeting Materials under Investor RelationsStockholder Services.
Please read it carefully. However, the financial statements and the Annual
Report do not legally form any part of this proxy soliciting
material.

Annual
Report on Form 10-K

The Company filed an annual report on Form
10-K for fiscal year ended September 30, 2016 with the SEC. Stockholders may
obtain a copy, without charge, by visiting the Companys website at
www.franklinresources.com.

The Company will provide a copy of the
fiscal year 2016 annual report on Form 10-K, including the financial statements
and financial schedules, upon written request to the Companys Secretary, Maria
Gray, at the Companys principal executive offices, Franklin Resources, Inc.,
One Franklin Parkway, San Mateo, CA 94403-1906. Additionally, we will provide
copies of the exhibits to the annual report on Form 10-K upon payment of a
reasonable fee (which will be limited to our reasonable expenses in furnishing
such exhibits).

VOTE BY INTERNET - www.proxyvote.comUse the
Internet to transmit your voting instructions and for electronic delivery of
information up until 11:59 p.m., Eastern Time on February 14, 2017. Franklin
Templeton 401(k) Retirement Plan participants must vote by 2:00 p.m., Eastern
Time on February 10, 2017. Have your proxy card in hand when you access the web
site and follow the instructions to obtain your records and to create an
electronic voting instruction form.

VOTE BY PHONE -
1-800-690-6903Use any touch-tone
telephone to transmit your voting instructions up until 11:59 p.m., Eastern Time
on February 14, 2017. Franklin Templeton 401(k) Retirement Plan participants
must vote by 2:00 p.m., Eastern Time on February 10, 2017. Have your proxy card
in hand when you call and then follow the instructions.

VOTE BY MAILMark, sign and date your proxy card and return it in the
postage-paid envelope we have provided or return it to Vote Processing, c/o
Broadridge, 51 Mercedes Way, Edgewood, NY 11717.

ELECTRONIC DELIVERY OF FUTURE PROXY
MATERIALSIf you would like to reduce the
costs incurred by our company in mailing proxy materials, you can consent to
receiving all future proxy statements, proxy cards and annual reports
electronically via e-mail or the Internet. To sign up for electronic delivery,
please follow the instructions above to vote using the Internet and, when
prompted, indicate that you agree to receive or access proxy materials
electronically in future years.

DO NOT RETURN YOUR PROXY CARD IF YOU
ARE VOTING VIA THE INTERNET OR BY TELEPHONE.

TO VOTE, MARK BLOCKS BELOW IN
BLUE OR BLACK INK AS FOLLOWS:

E15115-P84281-Z68960

KEEP THIS PORTION FOR YOUR RECORDS

DETACH AND RETURN THIS PORTION
ONLY

THIS PROXY CARD IS VALID
ONLY WHEN SIGNED AND DATED.

FRANKLIN RESOURCES, INC.

The Board of
Directors recommends a vote FOR all the nominees
listed.

1.

Election of Directors

Nominees:

For

Against

Abstain

1a.

Peter K.
Barker

☐

☐

☐

1b.

Mariann
Byerwalter

☐

☐

☐

1c.

Charles E.
Johnson

☐

☐

☐

1d.

Gregory E.
Johnson

☐

☐

☐

1e.

Rupert H. Johnson,
Jr.

☐

☐

☐

1f.

Mark C.
Pigott

☐

☐

☐

1g.

Chutta
Ratnathicam

☐

☐

☐

1h.

Laura
Stein

☐

☐

☐

1i.

Seth H.
Waugh

☐

☐

☐

For address changes and/or
comments, please check this box and write them on the back where
indicated.

☐

For

Against

Abstain

1j. Geoffrey Y.
Yang

☐

☐

☐

The Board of
Directors recommends a vote FOR Proposals 2 and 4 and every 3 Years for
Proposal 3.

2.

Advisory vote on executive
compensation (say on pay vote).

☐

☐

☐

1
Year

2
Years

3 Years

Abstain

3.

Advisory vote on the frequency of
holding the say on pay vote.

☐

☐

☐

☐

For

Against

Abstain

4.

To ratify the appointment of PricewaterhouseCoopers LLP as the
Companys independent registered public accounting firm for the fiscal
year ending September 30, 2017.

☐

☐

☐

The
Board of Directors recommends you vote AGAINST the following
proposals.

NOTE: Please sign exactly as your name(s) appear(s) hereon. When signing as
attorney, executor, administrator, or other fiduciary, please give full title as
such. Joint owners should each sign personally. All holders must sign. If a
corporation or partnership, please sign in full corporate or partnership name by
authorized officer.

Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available
at www.proxyvote.com.

E15116-P84281-Z68960

FRANKLIN RESOURCES,
INC.

This proxy card/voting instruction
form is solicited on behalf of the Board of Directors

With this proxy, the stockholder
signing on the reverse side appoints Gregory E. Johnson, Rupert H. Johnson, Jr.
and Maria Gray (the "proxy holders"), or any one of them, as the stockholder's
proxies with full power of substitution. The stockholder appoints the proxy
holders collectively and as individuals, to vote all the stockholder's shares of
Franklin Resources, Inc. (the "Company") common stock at the Annual Meeting of
Stockholders, and at any and all adjournments or postponements of the meeting,
on the matters set forth on the reverse side of this card. This proxy card also
provides voting instructions for Franklin Templeton 401(k) Retirement Plan
participants. The Annual Meeting of Stockholders will be held on Wednesday,
February 15, 2017, at 9:30 a.m., Pacific Time, in the H.L. Jamieson Auditorium,
One Franklin Parkway, Building 920, San Mateo, California.

The Board of Directors has solicited
this proxy and it will be voted as specified on this proxy card on the proposals
proposed by the Company listed on the reverse side. If you do not mark any votes
or abstentions, this proxy will be voted FOR all nominees to the Board of
Directors, FOR the advisory vote on executive compensation (say on pay vote),
FOR an advisory vote on the frequency of holding the say on pay vote every 3
years, FOR ratification of the appointment of PricewaterhouseCoopers LLP as the
Companys independent registered public accounting firm for the fiscal year
ending September 30, 2017, AGAINST the stockholder proposal requesting a Board
report on climate change and proxy voting, and AGAINST the stockholder proposal
requesting a Board report on executive pay and proxy voting. If any other
matters come before the meeting to be voted on, the proxy holders named in this
proxy will vote, act and consent on those matters in their
discretion.